WASHINGTON, D.C. – Today, the American Investment Council (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 AIC Director of Research Jamal 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.”
The paper compiles research showing that private equity investments are consistently the best-returning asset class for pension funds over the long term. These returns are crucial to supporting the retirements of firefighters, police officers, teachers and other state employees as public pension funds face $1.4 trillion in unfunded liabilities.
Additionally, private equity provides public pensions with investment diversification. As more companies choose to stay on private markets, private equity investments allow U.S. public pension funds to gain exposure to growth companies that have the potential to provide outsized returns.
Some of the nation’s largest public pension funds are expanding their investments in private equity. Earlier this year, California Public Employees Retirement System (CalPERS) Chief Investment Officer Ben Meng said, “We need private equity, we need more of it, and we need it now.”
Read the full paper here.
View a short accompanying video here.