The California Public Employees’ Retirement System is firing most external “emerging” equity fund managers as the largest U.S. public pension reworks investment strategies to meet its return target.

Returns from both traditional and emerging managers overall “haven’t contributed enough to achieving 7% target,” Chief Executive Officer Marcie Frost wrote in an Oct. 21 memo to the board, a copy of which was seen by Bloomberg. CIO magazine earlier reported the move.

Calpers, with $387 billion in assets as of Dec. 3, has long been reducing outside managers to reduce costs. The process accelerated under Chief Investment Officer Ben Meng, who started in January.

“In past three months we reduced traditional external managers from $30-plus billion to $5 billion -- from 17 managers to three,” Frost said in the memo. “Now also restructuring emerging manager program and reducing number of managers -- from five to one and $3.6 billion to $500 million.”

Calpers didn’t immediately reply to a request for comment.

Traditional managers have underperformed their benchmarks by 48 basis points over the past five years net of fees and emerging managers by 126 basis points, according to Frost.

Calpers launched its emerging manager program for some asset classes in 1991 and added equity funds eight years later, according to its website. Many of the firms are led by women and minorities. Candidates include equity fund firms with less than $2 billion under management.

“An ancillary benefit of our emerging manager strategies is greater ethnic and gender diversity among Calpers external fund managers,” according to a fact sheet on the program.

Frost’s memo doesn’t name managers who may be fired, but said the investment team would “begin notifying our emerging manager advisers who will no longer retain a mandate from Calpers.”