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New AIC Pension Study: Private Equity Delivers Highest Returns For Public Pension Funds
"Private equity returns strongly support the retirement plans of teachers, firefighters, police officers and dedicated public servants in all 50 states"

WASHINGTON, D.C. – Today, the American Investment Council (AIC) released its 2019 Public Pension Study, which analyzes investment returns by 165 U.S. public pension funds and highlights how private equity continues to deliver the highest returns of any asset class.

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 10.2 percent surpassing public equity’s 8.5 percent and real estate’s 4.8 percent.

  • “Private equity returns strongly support the retirement plans of teachers, firefighters, police officers and dedicated public servants in all 50 states,” said Drew Maloney, AIC President and CEO. “Public pension funds across America partner with private equity because our industry has a proven track record of maximizing returns while providing stability.” 
The study also 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 13.63 percent. Mass PRIT has topped the list four times since the study was first published in 2012.

The Ohio School Employees Retirement System finished second with 13.30 percent returns, and the Minnesota State Board of Investment finished third with 11.70 percent returns. The study also lists the 10 pensions with the highest levels of private equity investment.

Chief investment officers at public pension funds continue to partner with private equity because it provides consistently high and stable returns.

  • Massachusetts Pension Reserve Investment Board (Mass PRIM): “Mass PRIM’s private equity program has consistently performed extremely well for the 300,000 state and municipal employees, teachers, retirees and others that count on us to deliver strong investment returns on their pension assets. Our Top 5 ranking in each year of the AIC study’s history reinforces the importance of our PE portfolio to Mass PRIM’s overall performance,” said Michael G. Trotsky, CFA, Executive Director and Chief Investment Officer of Mass PRIM. “Our long-term commitment to this asset class enables us to partner with the industry’s top investment managers – allowing our team to access the most attractive opportunities in PE on behalf of our member plans and beneficiaries.”
  • Los Angeles County Employees’ Retirement Association (LACERA): “LACERA’s mission is to produce, protect and provide the promised benefits to our 165,000 members,” said LACERA Chief Investment Officer Jonathan Grabel. “Private equity investments have been and are an important strategy within our total portfolio such that we can achieve this mission. LACERA works diligently to identify the best strategies across asset categories, including private equity, that fit our portfolio, while ensuring alignment with our vision and values.  We embrace a culture that seeks to continually improve our processes, advance best practices, and strengthen our partnerships, thereby positioning this asset category to continue to advance our mission.”
  • Public Safety Personnel Retirement System of the State of Arizona: “There’s the higher return potential but the real pull is that private equity offers investors far greater insight and hands-on influence than what you get with public markets,” said Mark Steed, Chief Investment Officer of Arizona’s Public Safety Personnel Retirement System. “That’s incredibly attractive when you’re trying to provide thousands of pensions at the lowest possible cost to taxpayers and employers.”
  • West Virginia Investment Management Board (WVIMB): “The WVIMB’s Private Equity portfolio’s incremental gains, multiplied by two billion dollars, has put a lot of extra money into our pension plans, helping close the funding gap, and better securing the future for West Virginia’s retirees,” said Craig Slaughter, WVIMB Chief Executive Officer and Executive Director.
  • Ohio School Employees Retirement System: “Ohio School Employees Retirement System is very pleased to be ranked number two in Private Equity returns for this 10 year period among public pension plans. Private Equity has a 10% allocation in our portfolio and it is very important that we strive to achieve superior returns in this space, where the dispersion of returns can be very wide. Our Private Equity strategy is very focused and selective and it is gratifying to note that our efforts have delivered strong performance for our fund and its members.” – Farouki Majeed, CFA, Chief Investment Officer
  • Houston Firefighters’ Relief and Retirement Fund: “We are very confident in the prospects for private equity investments in our long-term investment mix,” said Brett Besselman, Chairman of the Board of Trustees for HFRRF’s 7,354 active and retired members and beneficiaries. “Private equity opportunities far exceed those available in stock market investing for the foreseeable future and are a welcome addition to our portfolio diversification effort.”
Currently, 91 percent of public pension funds invest 8.7 percent of their portfolios in private equity, on a dollar-weighted basis.
Earlier this year, the AIC released a paper examining why public pension funds across America continue to invest in private equity. In a comprehensive report, AIC Director of Research Jamal Hagler shows that private equity investments help public pensions achieve two crucial investment goals: performance and diversification.
  • Private equity investments allow pension funds to earn healthy returns and invest in growing companies not available on public markets,” said Hagler“For these reasons, pensions across America will continue to turn to private equity to ensure that they are able to meet their financial obligations.
Read the full 2019 AIC Public Pension Report here.