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"We've done significant analysis to get to this point," said Henry Jones, chair of the Investment Committee. "After reviewing the Capital Market Assumptions, hearing from our stakeholders, and considering the recent change made last year in the discount rate, we feel that this portfolio represents our best option for success while protecting our investments from unnecessary risk."

As part of the Asset Liability Management (ALM) process, the Board examined four potential portfolios and their impact on the CalPERS Fund. Each portfolio represented different distributions of assets based on varying rates of expected return and risk of volatility. Ultimately, the staff recommended the portfolio with expected volatility of 11.4 percent and a return of 7 percent, which matches the December 2016 decision to lower the discount rate to 7 percent over the next three years. For comparison, the Fund's net rate of returns since 1988 is 8.4 percent.

"The Board heard employers' concerns about the pressures of increased pension costs," said Marcie Frost, CalPERS chief executive officer. "They balanced those concerns with making sure we are not taking on additional risk in the market and leaving the Fund more vulnerable during an economic downturn."

The new asset allocation will be distributed as follows:

• 50% in Global Equity
• 28% Fixed Income
• 13% Real Assets
• 8% Private Equity
• 1% Liquidity

Tomorrow, a committee of the Board will review the proposed economic and demographic actuarial assumptions as part of the ALM process and review of actuarial assumptions. The primary economic assumption under review is the discount rate that is determined after an asset allocation is selected.

Demographic assumptions review life expectancy, retirement and disability rates, and changes in salaries. The most recent findings show that life expectancies for women remain generally unchanged from the last study in 2014, while men's decreased on average by approximately 1 month. The review of assumptions also found that state CHP and Peace Officers and Firefighters are electing to retire earlier than expected. Public agency members subject to certain benefit formulas (PA Police 2% at 50 and 3% at 55 and PA miscellaneous 2% at 60) were also found to have retired earlier than expected. Most other public agency members show a slightly later retirement.

While actuarial assumptions can affect employer and employee contribution rates, these new assumptions are not expected to have any substantial impact on rates.

In making its decision, the Board reviewed recommendations from CalPERS team members, external pension and investment consultants, and input from employer and employee stakeholder groups.