(Bloomberg) — The California Public Employees' Retirement System, the biggest U.S. pension, may change the benchmark it uses to measure private equity performance as $31.3 billion in investments underperform.

The $294 billion pension, known as Calpers, currently uses a custom benchmark its staff designed based on global and U.S public equity plus 300 basis points. That benchmark is imprecise in measuring private equity performance and encourages riskier investments to meet the goal, officials said.

Calpers' current staff-designed benchmark creates "unintended active risk for the program, as well as for the whole fund," Réal Desrochers, the system's senior investment officer in charge of private equity, said in a report today to the fund's governing board. Calpers' 10-year return on private equity of 13.3 percent as of June 30 fell short of its own benchmark by 2.1 percentage points, according to the pension system's data. The performance also missed in one-, three- and five-year periods.