The California Public Employees’ Retirement System (CalPERS) is exploring a potential return to hedge fund investing through separately managed accounts (SMAs), 12 years after its high-profile withdrawal from the industry, according to a report by Pensions & Investments.

The $653.8bn pension fund has held discussions with Goldman Sachs and Dockside Platforms about gaining hedge fund exposure through SMAs, according to correspondence obtained through a public records request.

Emails exchanged earlier this year indicate that CalPERS has been assessing the structure as a means of accessing diversifying investment strategies. In May, Goldman Sachs highlighted the uncorrelated performance of hedge fund managers as a potential rationale for renewed allocations, while Dockside Platforms contacted the pension fund in February regarding its exploration of the SMA market.

June Kim, CalPERS’ deputy chief investment officer for capital markets, is reportedly leading the review, although no decision has been made on whether the pension fund will resume hedge fund investing.

CalPERS exited the industry in 2014, liquidating investments across 24 hedge funds and six funds of hedge funds as part of a broader effort to reduce portfolio complexity and investment costs. The decision became one of the most prominent institutional withdrawals from the sector.

The potential reversal comes amid renewed institutional interest in hedge funds, supported by stronger recent performance and growing demand for portfolio diversification and downside protection.

CalPERS has also undergone significant changes to its investment approach since the original exit. Stephen Gilmore became chief investment officer in 2024, while the pension fund adopted a total portfolio approach in July 2026, integrating investment management and risk allocation across asset classes.

A CalPERS spokesperson said the pension fund regularly evaluates investment opportunities to strengthen portfolio diversification and resilience while meeting its target return.

Any renewed allocation would mark a significant shift in strategy for one of the world's largest public pension funds, whose 2014 decision to abandon hedge funds drew widespread attention across the institutional investment industry.