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What They Are Saying: Public Pension Funds Benefit from Private Equity Investments
Last week, the American Investment Council released its 2021 public pension study showing that private equity was once again the best returning asset class for public pension portfolios. In 2020, private equity investments delivered a median annualized return of 12.3 percent over a 10-year period for the 85 percent of public pension funds across America that partner with private equity. Copied below are direct quotes from five public pension fund chief investment officers and executive directors about why they chose to invest in private equity:

Illinois State Board of Investment (ISBI) Executive Director & Chief Investment OfficerJohara Farhadieh – “ISBI is proud to be named as the top performing pension fund for private equity in AIC’s Public Pension Study for the second year running. ISBI seeks to thoughtfully control fees while achieving the best performance for our 165,000+ beneficiaries. We will continue to work towards strong private equity returns in the years ahead, while continuing to push the envelope on diversity and inclusion in the industry.”

West Virginia Investment Management Board Private Equity Investment Officer Jim Herrington – “When Private Equity investors do their homework, they earn the greatest opportunities to exceed the returns of the market in general.”

Minnesota Teachers Retirement Association Executive Director Jay Stoffel – “We are fortunate to have a very talented and dedicated staff at the MN State Board of Investment. The public school educators, retirees, and taxpayers all share in the success of the SBI private equity program.”

Massachusetts Pension Reserves Investment Management (Mass PRIM) Executive Director and Chief Investment Officer Michael Trotsky“Mass PRIM’s private equity portfolio continues to perform extremely well over the long term. That performance directly benefits our member plans and beneficiaries, who rely on PRIM for strong returns and careful management of risk. Since AIC began this study in 2012, Mass PRIM has consistently ranked in the top five. We partner with the industry’s top investment managers, which allows us to gain exposure to companies that have excellent long-term potential.” 

Public School & Education Employee Retirement Systems of Missouri (PSRS/PEERS) Chief Investment Officer Craig Husting – “A long-term commitment and investment in the private equity asset class has enhanced our ability to deliver on our mission of providing retirement security to Missouri’s educators and education employees after a full career of service.  Private equity, within the Missouri PSRS/PEERS investment portfolio, has produced net-of-fees returns significantly greater than the returns achievable in publicly traded stocks over all time periods.”    

The publication Pensions & Investments recently published a story examining the results of the AIC’s pension report. Read the full story below.

Private equity returns help public pension funds
Pensions & Investments
By Larry Rothman
July 12, 2021U.S. public pension funds allocated 9% of their assets to private equity in 2020, according to the American Investment Council. Public equities made up the largest asset class, with about 45%, followed by fixed income’s 24%.

Over the past decade, public pension funds generated more than a 12% annualized return from their private equity investments, net of fees. This was more than 100 basis points better than public equities and 170 basis points higher than real estate. The private equity return was nearly 800 basis points higher than fixed income’s 4.5% annual return.