Large pension plans that allocate capital to private equity are finding that returns in the asset class outperform all other investments, a new study released by the Private Equity Growth Capital Council (PGCC) finds.
In an Oct. 23 statement regarding the report, the Washington, D.C.-based PEGCC said it examined 146 U.S. public pension plans with assets greater than $1 billion to assess the asset allocations of the funds, as well as the performance of private equity versus other asset investments.
The full report released by the Council lists the Massachusetts Pension Reserves Investment Trust Fund as the pension fund with the highest private equity returns. The top 10 list also includes the Los Angeles County Employees’ Retirement Association, the Teacher Retirement System of Texas, the Minnesota State Board of Investments and the Iowa Public Employees’ Retirement System.
A breakdown of the top funds by the amount invested in the asset class lists the California Public Employees’ Retirement System in the lead spot, however, with $34.2 billion invested in the space. The California State Teachers’ Retirement System took the second position with $22.6 billion investment, while the Washington State Department of Retirement Systems, with a reported $16.1 billion invested in private equity, holds the third slot.
The reporting dates for the funds vary between March 31, 2012 and Sept. 30, 2012, the findings state. Data used for the study was collected from Comprehensive Annual Financial Reports (CAFR), with date ranges of March 31, 2012 to July 31.
"Time and again private equity has proven that it's the single best asset class for public pensions, by delivering superior returns over long time horizons," Steve Judge, president and CEO of the PEGCC, said in the Wednesday statement. "Private equity continues to strengthen the retirement security of the millions of American police officers, firefighters, teachers and administrators who rely on hard-earned pension benefits. There is no doubt that private equity returns are essential to improving the pension funding equation.”
PEGCC VP of Research Bronwyn Bailey, also noted, "Pension investment in private equity helps to offset underperforming asset classes and alleviates some financial stress on pensions, their members and the constituents who support them.”
