Which US pension funds have the best PE track record?

Los Angeles Fire and Police Pension System’s buyout portfolio generated the best performance among US public pensions since vintage 2004, according to a study by HEC Paris.

Los Angeles Fire and Police Pension System, Florida State Board of Administration and the California Public Employees’ Retirement System have the best-performing buyout portfolios among US public pension funds, according to the 2018 HEC Limited Partner Buyout Performance Ranking.

Private equity buyout investments by LAFPP from vintages 2004 to 2013 ranked first among the top US pensions analysed by Paris-based HEC, an educational and research institute. LAFPP had an aggregate risk score of 0.80 and an aggregate return score of 1.56.

The $21.5 billion pension has a 10 percent target allocation to private equity that stands at 9.1 percent. It has backed buyout funds managed by Bain Capital, CVC Capital Partners and GTCR, among others according to PEI data.

The $205 billion Florida SBA ranked second, with a return score of 0.61 and risk score of 1.32. The investor has backed buyout funds of Thoma Bravo, Apollo Global Management and Lightbay Capital. CalPERS, which has $345 billion in assets, was third with a 0.91 risk score and 0.74 return score. The US’s biggest public pension disclosed in November that it made a $600 million commitment to Carlyle Partners VII and $437.5 million to Bridgepoint Europe VI.

New York State Teachers’ Retirement System, State Teachers’ Retirement System of Ohio, Public Employees Retirement System of Idaho and Minnesota State Board of Investment are also among US public pensions in the top 10 ranking.

According to HEC, the ranking answers the question: “Which limited partner buyout portfolio generated the best performance, considering return and risk, over the past years?”

Two ranking criteria were used: the aggregate return score of an LP portfolio based on difference performance measures for all the funds in the portfolio developed by advisory firm PERACS, and a risk coefficient that captures the robustness of the value of the funds in their portfolios from a “value at risk” perspective based on the eFront VaR method.

The study analysed performance data from 158 US pension funds and the 3,431 fund commitments they made into 569 buyout funds they raised between 2004 and 2013. The aggregate equity volume over the period was $255.5 billion.

US public pension funds HEC selected in the study have committed to at least 25 buyout funds over the period with a total commitment size of at least $100 million.