Top 10 Pensions Funds for Private Equity Returns

A study of 155 U.S. public pension funds, released Thursday by the American Investment Council, shows that private equity outpaces all asset classes in long-term returns on investments.

As of June 30, 2015, private equity investments by public pensions yielded a median 10-year annualized return of 11.4%, compared with public equity’s 7.6%, real estate’s 6.3% and fixed income’s 5.2% returns, according to the research conducted by AIC in partnership with technology firm Bison.

“The data show that private equity is the standout asset class for public pensions over the long-term, and its allocation is critical to public pensions as they seek to meet their financial obligations,” AIC’s vice president of research and investor relations Bronwyn Bailey, said in a statement.

Bailey said that in an environment of low interest rates and public market volatility, “pension officials can turn to private equity as a source of stable, high returns for their beneficiaries.”

The study showed that public pensions invested 9.2% of their portfolios in private equity. They also invested 45.9% in public equities, 25.8% in fixed income and 8.2% in real estate.

Last year, 88% of the public pension funds in the study invested in private equity, with 53 allocating between 5% and 10%.

Following are the top 10 public pensions ranked for private equity returns and for investment volume, according to AIC. 

Top 10 Pensions Funds by Private Equity Returns (10-Year Annualized)

1. Teacher Retirement System of Texas: 15.4%

2. San Francisco Employees’ Retirement System: 15.2%

3. Iowa Public Employees’ Retirement System: 15%

4. Massachusetts Pension Reserves Investment Trust Fund: 14.8%

5. Houston Firefighters’ Relief and Retirement Fund: 14.7%

6. Minnesota State Board of Investment: 14.4%

7. Massachusetts Water Resources Authority Retirement System: 13.5%