2018 AIC Public Pension Study: Private Equity Delivers Highest Returns for Public Pension Funds

WASHINGTON – Today, the American Investment Council (AIC) released its 2018 Public Pension Study, which analyzes investment returns by 163 U.S. public pension funds and highlights how private equity continues to outperform other asset classes.

The study shows private equity continues to lead all asset classes in long-term investment performance, with private equity’s median 10-year annualized return of 8.6 percent surpassing public equity’s 6.1 percent, fixed income’s 5.3 percent, and real estate’s 4.7 percent.

“Our annual Public Pension Study underscores private equity’s longstanding position as an essential component in achieving public pensions’ long-term investing goals,” said Mike Sommers, AIC President and CEO. “The financial benefits of these returns directly impact millions of dedicated American public servants like teachers, firefighters, and police officers who rely on their pension income in retirement.”

View Pension Report Summary

The study names the 10 funds with the highest private equity returns. The Massachusetts Pension Reserves Investment Trust (Mass PRIT) took home the top spot, earning a 10-year annualized return of 13.37 percent. Mass PRIT has topped the list three times since the study was first published in 2012.

“We are in this asset class for the long term, which has given us greater flexibility to partner with industry-leading investment managers to drive performance higher,” said Michael Bailey, Director of Private Equity at the Massachusetts Pension Reserves Investment Management Board (Mass PRIM). “The AIC‘s #1 ranking of the portfolio’s 10-year returns shows that our private equity team’s investment approach and the managers’ skills are paying off for the pension fund’s beneficiaries.”

The Ohio School Employees Retirement System finished second with 13.1 percent returns, and the Utah Retirement System finished third with 12.05 percent returns. The study also lists the 10 pensions with the highest levels of private equity investment.

“Private equity investment is critical to helping public pensions meet their financial obligations,” said AIC Vice President of Research and Investor Relations Bronwyn Bailey. “The average actuarial target return for pension plans is 7.5 percent, and this report shows that only one investment strategy – private equity – exceeded the target over the last ten years.”

About the Annual Public Pension Study

The American Investment Council’s 2018 Public Pension Study examines the private equity investments of 163 U.S. public pension funds. The information was collected through publicly available comprehensive annual financial reports, and, when necessary, direct communication with public pension funds.