Private equity returns have outperformed all other asset classes in large public pension funds over the last decade.
That’s according to an analysis by the Private Equity Growth Capital Council, which examined 146 U.S. public pension funds with assets greater than $1 billion to see what their allocation was and to compare the performance of their private equity investments to other classes.
The study found the Massachusetts Pension Reserves Investment Trust Fund maintained the highest private equity performance at 15.4 percent over 10 years, followed by the Los Angeles County Employees Retirement Association and the Teacher Retirement System of Texas.
The rankings are based on 10-year and five-year annualized returns by pensions’ private equity investments.
The top pension by private equity allocation was CalPERS, with $34.2 billion invested in private equity. CalSTRS and the Washington State Department of Retirement Systems allocated the second and third greatest amounts with $22.6 billion and $16.1 billion, respectively, to private equity funds.
The report found that private equity investment in public pensions increased from last year to 10.3 percent of total public pension fund investment. It was 9.6 percent last year. Private equity is the third most invested asset class behind public equity and fixed income.
Private equity also delivered a 10 percent annualized return to the median public pension over the last 10 years, more than any other asset class. By comparison, the median public pension received a 6.5 percent annualized return on its total fund during the same period.
The Private Equity Growth Capital Council is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy.