U.S. public pension funds allocated 9% of their assets to private equity in 2020, according to the American Investment Council. Public equities made up the largest asset class, with about 45%, followed by fixed income's 24%.
Private equity returns help public pension funds
Over the past decade, public pension funds generated more than a 12% annualized return from their private equity investments, net of fees. This was more than 100 basis points better than public equities and 170 basis points higher than real estate. The private equity return was nearly 800 basis points higher than fixed income's 4.5% annual return.