Pensions’ buyout returns trump other asset classes

Private equity has generated a median 10-year annualised return of 10% for US pensions, according to a PEGCC study which analyses the performance of 146 groups with $1bn or more invested in the asset class.

Private equity investments have outperformed all other asset classes for US pensions over the past decade, according to research from the Private Equity Growth Capital Council.

Private equity generated a median 10-year annualised return of 10 percent for US pensions included in the study, compared to 6.7 percent for real estate and 6.6 percent for fixed income. Public equity generated a median annualised return of 5.8 percent. The data included 146 funds that invest $1 billion or more in the asset class.

“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 chief executive officer of the PEGCC, said in a statement.

The Massachusetts Pension Reserves Investment Trust Fund produced the highest private equity return of all pension in the sample, at 15.4 percent over 10 years and 9.1 percent over five years. The Los Angeles County Employees Retirement Association generated the second highest private equity returns, followed by The Teacher Retirement System of Texas.

The California Public Employees’ Retirement System led the rankings based on dollars invested in private equity, with $34.2 billion. The California State Teachers’ Retirement System has the next highest invested in the asset class, with $22.6 billion, followed by the Washington State Department of Retirement Systems

US pensions included in the study allocated 10.3 percent of their assets to private equity, on a dollar-weighted basis, less than public equity and fixed income at 48.6 percent and 24.3 percent respectively, but above real estate at 7.5 percent.