The Virginia Retirement System's private equity programme returned 6.6 percent for fiscal year 2016 ended 30 June, the pension plan said earlier this month, representing a second consecutive year of lower returns.
This compares to the pension's 8.3 percent return for private equity in 2015 and a 23.2 percent return in 2014.
While VRS declined to comment on what contributed to the lower returns, the drop seems to have been widespread among US public pension plans in recent years. A year ago, VRS attributed the decline to underperforming investments in the energy sector and in Europe.
A VRS spokeswoman told Private Equity International that the pension currently has about $268 million of its private equity portfolio in energy-related funds. As of 30 June 2015, its top 10 private equity managers counted two energy general partners, Natural Gas Partners and First Reserve.
In 2016, private equity was the third best performing asset class for the $68 billion pension plan, behind real assets, which returned 11.6 percent, and fixed income, which returned 6.8 percent.
“The fund concentrated on proven opportunities, such as real assets and fixed income, while adding value through credit strategies and private equity,” Richmond-based VRS said in a 15 August statement.
The total fund includes about $5.2 billion in private equity, or a 7.6 percent private equity allocation. Its target allocation to private equity is 9 percent, the spokeswoman said. She added that VRS committed $1.4 billion to private equity during fiscal year 2016, but declined to disclose the planned commitment for 2017.
Commitments in 2016 have included $200 million to Leonard Green Equity Investors VII, $150 million to Vista Equity Partners Fund VI, $250 million toward a separate account with General Atlantic and $200 million toward a Littlejohn separate account.