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Private Equity

Private equity tops returns for public plans; MassPRIM portfolio leads the way – report

Private equity leads all asset classes in long-term investment performance among U.S. public pension plans, said a new report from the American Investment Council.

Among 163 U.S. pension plans measured by the private equity advocacy and research organization, the median annualized private equity 10-year return was a net 8.6%, according to the report. During the same time period, public equities returned an annualized 6.1%, followed by fixed income at 5.3% and real estate at 4.7%. The median return for all the funds measured was 5.3%.

Reporting data ranges from Sept. 30, 2016, to Dec. 31, 2017, with most data as of June 30, 2017, according to the report.

The $67 billion Massachusetts Pension Reserves Investment Management Board, Boston, had the highest annualized private equity return for the 10-year period at 13.37%, followed by the $14.7 billion Ohio School Employees Retirement System, Columbus, at 13.1%. The rest of the top five are the $37.1 billion Utah Retirement Systems, Salt Lake City, at 12.05%; the $56.5 billion Los Angeles County Employees Retirement Association, 11.6%; and the $4.2 billion Houston Firefighters' Relief and Retirement Fund, 11.1%.

On a dollar-weighted basis, U.S. public pension plans' allocation to private equity is 8.6%. The rest of the dollar-weighted allocation is 49.3% public equities, 23.8% fixed income, 8.1% real estate, 7.5% other and 2.6% cash and short-term investments.

Just less than 93% of the measured plans have some kind of exposure to private equity, with 44.5% of the 163 plans having exposure to the asset class of 5% to 10%. About 24% of the plans have an allocation of zero to 5%; 18.4% have an allocation of 10% to 15%; 4.9% have 15% to 20%; and 1.2% have 20% to 30% exposure. Eleven plans have no exposure to private equity.

The report is available on the American Investment Council's website.