Pension fund investments in private equity increased 38% to $269.8 billion, resulting in the sector accounting for about 7% of total defined benefit assets among the top 200 U.S. retirement funds in the 12 months ended Sept. 30.
According to data gathered for Pensions & Investments' annual survey of the nation's largest plan sponsors, buyout investments reported by defined benefit funds increased 26% to $149.2 billion, while venture capital grew 16.4% to $27.7 billion.
Once again this year, the California Public Employees' Retirement System, Sacramento, retained its top spot on P&I's list of the largest U.S. institutional investors in private equity. CalPERS' private equity assets grew by a third, to $29.88 billion from the year-earlier period. California State Teachers' Retirement System, West Sacramento, held onto second with private equity assets up 28% to $19.9 billion; New York State Common Retirement Fund, Albany, was third again, up 23.8% to $13.8 billion; and Oregon Public Employees Retirement Fund, Salem, retained fourth place with private equity assets growing 27% to $11.3 billion.
The increase is partly due to a trend in which institutional investors are paying out more in contributions in the form of capital calls to private equity funds than they get back in distributions, which are the investors' share of the profits.
“Institutional investors, in general, have experienced a decline in net cash flow into private equity programs,” according to Pension Consulting Alliance Inc. in a private equity performance report for CalPERS for the year ended Sept. 30.
“We are attributing the increase in private equity to the increase in valuations,” said Karen M. Harris, consultant in the capital markets research group, Callan Associates Inc., San Francisco.