Data Room: Everything is bigger in Texas

US public pension funds worried about returns being squeezed in their investment portfolios could perhaps turn to Teacher Retirement System of Texas for a lesson.

TRS has been regularly showing up on the top 10 list for the American Investment Council’s annual US public pension fund rankings based on private equity portfolio returns.

The latest report, released in October, measured private equity returns for 10-year periods as of 30 June, 2015. TRS topped the list with 15.4 percent, outperforming 154 other public pension funds in the AIC’s survey.

In terms of dollar amount invested in the asset class for the year, TRS comes fourth at $16.4 billion, behind such heavyweights as California Public Employees’ Retirement System. But size isn’t everything.

San Francisco’s and Iowa’s retirement systems and Massachusetts Pension Reserves Investment Trust Fund were right behind TRS in performance, but were nowhere to be seen in the top 10 of dollars committed to private equity. For example, MassPRIT’s private equity portfolio stood at $6.9 billion on 30 June 2015, less than half the size of TRS’.

“Great investment performance is a function of macro factors such as sector and geographical allocations and specific manager selection,” consultant TorreyCove Capital Partners chief executive and president David Fann tells PEI. “In general, venture capital and technology have outperformed.”

He adds that size can be an advantage in either direction.

“Smaller funds are able to access a greater number of high-quality lower mid-market and venture capital funds,” he says. “Larger players are able to craft separate accounts and other customised relationships. In addition, they are frequently beneficiaries of management fee breaks.”

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Top 10 funds by private equity returns*

1- Teacher Retirement System of Texas

2- San Francisco Employees’ Retirement System

3- Iowa Public Employees’ Retirement System

4- Massachusetts Pension Reserves Investment Trust Fund

5- Houston Firefighters’ Relief and Retirement Fund

6- Minnesota State Board of Investment

7- Massachusetts Water Resources Authority Retirement System

8- Virginia Retirement System

9- New York State Teachers’ Retirement System

10- Michigan Public School Employees’ Retirement System

Source: AIC/Bison