Pennsylvania returns -5.7% in private equity in 2009

The $24bn pension has been pulling back from private equity since last year as it battles severe over-weighting to the asset class.

Pennsylvania State Employees’ Retirement System, a $24 billion programme that has historically been one of the most active private equity investors, had a – 5.7 percent return in its private equity programme in 2009.

The loss still beat the programme’s Cambridge benchmark, which returned -9.9 percent in 2009. PA SERS’ returned -6.8 percent in 2008, and 41 percent in 2007.

PA SERS splits out venture capital from private equity. Venture capital returned -14.8 percent in 2009 and -.2 percent in 2008.

Real estate was the worst performing asset class for the $24.6 billion public pension, which managed to report overall portfolio gains of 9.1 percent thanks to a rebound in the stock and bond markets.

The pension has pulled back from private equity investing since last year as it battles a grossly overweighted allocation to the asset class. PA SERS last year lowered its target to alternatives to 12 percent from 14 percent. Its current allocation stands at about 24.3 percent.

PA SERS has not completely stopped investing in private equity, and has made commitments to Oaktree Capital Management, JH Whitney and Advent International.

The pension released its annual report recently, which revealed some details about its private equity programme. Since 1985, PA SERS has worked with 91 GPs and has taken 226 limited partner stakes in funds.

The pension’s alternatives portfolio is valued at about $6 billion, of which about $2.3 billion is unfunded private equity commitments, and $653 million is unfunded venture capital.

During 2009, the pension also paid out $133.7 million in management fees to alternative investment managers, $7.4 million in investment-related fees and $1.9 million to Cambridge Associates for consultancy work.