LP Special: League leaders

The top five US pension funds by private equity returns have remained mostly unchanged in the past couple of years. In the latest ranking, the Massachusetts Pension Reserves Investment Trust Fund stole the top spot from Teacher Retirement System of Texas. PRIT Fund’s 10-year private equity return stood at 17.93 percent net of management fees and carry as of June 2014, compared with a median 10-year annualised return of 12.1 percent. Teacher’s return fell to 17.8 percent from 18.2 percent in the previous year’s tally. Iowa Public Employees’ Retirement System is a newcomer to the list, while San Francisco Employees’ Retirement System dropped out.

1 MASSACHUSETTS PENSION RESERVES INVESTMENT TRUST FUND
UP 17.9%

The Massachusetts Pension Reserves Investment Trust Fund’s stellar private equity performance among US pension plans can be attributed to its long-term and consistent approach to the asset class and its ability to adapt to an increasingly competitive market by focusing on smaller managers, which the Massachusetts Pension Reserves Investment Management Board believes significantly boosts returns. Similar to its peers, it has also increasingly been focusing on co-investments. The $60 billion pension fund has a 10 percent target allocation to private equity and had an actual 11.4 percent allocation, as of 31 December 2015.

2 THE TEACHER RETIREMENT SYSTEM OF TEXAS
DOWN 17.8%

The Teacher Retirement System of Texas prides itself on strategic long-term relationships with Apollo Global Management and KKR, which are in their early stages but have already proven beneficial to the fund, delivering strong returns in strategies including private equity, real assets and credit markets. With more than $130 billion in assets under management, TRST has a long-term target allocation to private equity of 13 percent and an actual allocation of 12.5 percent. It’s also one of the few US pension plans with an office in London, which opened in September to focus on European investments.

3 THE MINNESOTA STATE BOARD OF INVESTMENT
LEVEL 16.2%

An active investor in private equity, The Minnesota State Board of Investment, which commits on average $450 million a year to the asset class, remained in third place in the latest ranking. In 2015, it approved commitments to Welsh, Carson, Anderson & Stowe, Paine & Partners, and Oaktree Capital Management’s latest funds. With $78.4 billion in total assets under management, the pension plan, which doesn’t have a specific allocation target for private equity, had $4.7 billion in the asset class, as of June 2015. Some of its best performers, as of 31 March, included The Blackstone Group and Lexington Capital Partners.

4 HOUSTON FIREFIGHTERS’ RELIEF AND RETIREMENT FUND
LEVEL 16%

Houston Firefighters’ Relief and Retirement Fund is also a long-term investor in private equity, although it is much smaller than its peers on this list, with less than $4 billion in total AUM. Its target allocation to private equity is 12 percent, but the actual allocation was 9 percent, as of June 2015. Within private equity, the fund is heavily committed to buyouts, secondaries and venture capital. Distressed debt funds are also a large chunk of its private equity allocation. Linda Calnan, HFRRF’s senior investment officer, has managed the private equity portfolio since 2003.

5 IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM
UP 15.7%

Iowa Public Employees’ Retirement System, which has about $28 billion under management, has been giving full discretionary authority to its private equity fund of funds manager, Pathway Capital Management, to invest in the asset class for decades. The pension plan increased the amount it plans to commit to private equity for 2016 to $800 million, up from $700 million last year, while the dollar allocation was $800 million in 2014 and $650 million in 2013. IPERS has had an 11 percent target allocation to private equity since 2014.