US. Private equity allocation helps public pension plans
U.S. public pension plans had 11% of their assets invested in private equity, and 89% had some amount allocated to the asset class, according to the American Investment Council’s 2022 Public Pension Study. Public equity and fixed income, combining for 68%, had the largest share.
The median 10-year annualized private equity return among public pension funds that the AIC examined was 15.1%. This return was better than other major asset classes, such as public equities’ 11.8%.
However, recent performance has slipped. Based on the Cambridge Associates U.S. Private Equity index, the preliminary first-quarter return was -0.7%. In the third and fourth quarters of 2021, private equity returned 6% and 5.7%, respectively.
For the 10 years ended June 30, 2021, Illinois State Board Investment’s 19.8% annualized return from private equity investments led all public pension funds, edging out the West Virginia Investment Management Board’s 19.7%, according to the AIC study.
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