"If you're already in a pension deficit, taking on more risk investing in stocks, high yield bonds, emerging markets, or even real estate, private equity and hedge funds, you might end up digging an even bigger hole for your pension, one you'll never climb out of. On the investment front, CalPERS is doing what it has to do to reduce risk and stabilize the volatility of its funding level. It wisely nuked its hedge fund program which it never really took seriously and is now looking to reduce risk by increasing its exposure to bonds."