The $12.2B Contra Costa County Employees’ Retirement Association (CCCERA) is positioning its growth sub-portfolio as the primary driver of future benefit payments.
During a recent board meeting, CCCERA’s investment team noted the growth sub-portfolio had returned 9.0% year-to-date, as of July 31, 2025. Over the past three, five, and 10 years, returns were 7.7%, 9.0%, and 8.0%, respectively. The fund’s consultant, Verus, previously forecasted an 8.8% return in 2015, and the portfolio remains broadly on track with that projection.
Meeting materials pointed to an expected 4.0% growth rate in emerging markets, including China, while developed markets are forecast to expand slightly above 1.5%. “Overall, global growth could average slightly better than 3.0%, barring surprises,” noted the report.
The materials also noted inflation is stabilizing at historical levels, though interest rates remain elevated, steepening the yield curve and signaling both potential rate cuts and heightened economic risks.
Despite macroeconomic uncertainty, valuations remain a concern. In the materials, the investment team cautioned that “even with a 10-year average of inflation-adjusted earnings, the S&P 500 appears richly priced.” If the Shiller price-to-earnings ratio reverts to its 20-year mean, forward returns could fall to about 2.0% annually over the next eight years.
Equity concentration also remains a challenge. The materials showed, as of June 2025, more than half (56%) of the MSCI USA Growth Index was concentrated in six mega-cap stocks: Nvidia (13%), Microsoft (12%), Apple (11%), Amazon (7.0%), Alphabet (7.0%), and Tesla (3.0%). Nearly 30% of the S&P 500 was tied up in the top five stocks, and almost 40% in the top 10. By contrast, small caps have declined in representation, with the Russell 2000 now making up just 4.0% of the Russell 3000, compared to a historical average of 7.0%.
The materials also highlighted increased focus by managers on artificial intelligence investments, spanning chipmakers, data providers, and utilities, noting few profitable use cases have emerged. Defense-related equities spending in Europe was viewed as another opportunity area. The materials pointed out that North Atlantic Treaty Organization countries, outside of the U.S., are increasing defense spending, particularly in European companies — a trend CCCERA’s team views as supportive for investment in this sector.
As well, the materials noted credit markets remain tight, though high-yield borrowers appear to be of higher quality, supported by CLO issuance and strong private credit demand. CCCERA’s investment team said it will continue to monitor these risks while leaning on the growth portfolio as the fund’s long-term return engine.
CCCERA also undertook significant portfolio rebalancing the growth and diversifying sub-portfolios during the summer, supported by its annual influx of employer contributions.
In July, the pension fund received approximately $369M in employer pre-payments. Combined with withdrawals from investment managers, the pension raised $1.04B to support rebalancing and the ongoing implementation of its new investment asset allocation strategy.
According to the materials, between July and September, CCCERA withdrew funds from Boston Partners ($100M), BlackRock ($100M), Emerald ($70M), Pyrford ($60M), Voya ($50M ), William Blair ($30M), First Eagle ($30M), PIMCO ($25M), Artisan (20M), and Ceredex ($10M). Proceeds were redeployed into DFA ($160M), Insight ($248M), Sit ($230M), GoldenTree ($100M ), KKR ($100M), Oak Hill ($100M), and DFA Treasury ($100M).
