Oregon and North American endowments highlight benefits of private equity

The Oregonian recently published an op-ed by Oregon’s treasurer, Ted Wheeler, and Oregon Investment Council Chairman Keith Larson, that highlights the importance of private equity investment for the Oregon Public Employees Retirement Fund:

Since 1981, private equity has been the top performer in the Oregon Public Employees Retirement Fund. For the past decade, the time-weighted annual return for Oregon’s private equity investments was 11.35 percent, versus 4.71 percent for the S&P 500.

Private equity is a vital part of the strategy of seeking out the best value and returns for Oregonians.

The piece also explains how investment in private equity has paid off not only for retirees but also for cities and towns throughout Oregon:

Remember this number: If Oregon had not been invested in private equity over the past decade — and had put those dollars into the regular stock market instead — it would have translated into an estimated $4 billion less in earnings — $400 million per year…

According to PERS, over the past decade, about 71 percent of the money needed to pay for benefits came from investment-generated income. Much of that success is attributable to Oregon’s decision to invest in private equity.

To put it in context, to lose the $400 million in additional returns would be to lose the equivalent of 4,000 teachers per year.

And Oregon is not alone.  In a recent Pensions & Investments piece, most North American endowments will continue their investments in private equity:

Sixteen percent intend to increase their long-term exposure and 78% plan to maintain it; for the short term, about 14% are looking to increase their exposure over the next 12 months, while 74% will maintain.

Fifty-five percent of North American endowments already have made private equity commitments this year, and 58% expect to make their next private equity commitment before the end of the year.

Managers of public pension funds and endowments understand that investment returns from private equity support the financial security of millions of average Americans that rely on resources from pensions and endowments.  Without private equity returns there will be fewer teachers in Oregon and reduced resources for endowments to distribute to students in need of an education.