Private Equity Powers Record-Breaking Pension Returns

The asset class has outperformed even public equities for many institutional investor portfolios.



Several of the largest public pension funds in the US and the world have reported record-breaking returns for the past fiscal year. And while robust stock markets are often credited for the 20%-plus returns, private equity is consistently the top-performing asset class within many of the portfolios.

For example, the $469 billion California Public Employees’ Retirement System (CalPERS) reported a preliminary 21.3% net return on investments for the 12-month period ending June 30. The robust performance was led by the portfolio’s private equity investments, which outpaced its public equity investments by 43.8% to 36.3%.

And the $308.6 billion California State Teachers’ Retirement System (CalSTRS) reported a record 27.2% net return on investments for fiscal year 2020–2021 thanks to private equity investment returns of 51.9%, which outpaced its public equity investments by more than 10 percentage points.

The $67.9 billion portfolio for the Maryland State Retirement and Pension System (MSRPS), which also recently reported a record fiscal year return of 26.7%, was also led by its private equity investments. The asset class earned 51.85% for MSRPS during the year, compared with its public equity investments, which returned  44.54%.  

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And for the Public Employees’ Retirement System of Mississippi, not only was private equity the top performing asset class during the most recent year, with a return of 58.87%, but it’s also the pension fund’s top performing asset class over the past three, five and 10 years, returning 24%, 21.72%, and 16.61%, respectively, on an annualized basis.

The asset class has also been boosting returns for pension funds outside the US, as $50 billion Swedish pension fund AP1’s 11% investment return for the first half of 2021 was led by the 22.8% return produced by its private equity assets, while its domestic and developed market equities returned 19.6% and 13.5%, respectively. And the Ontario Municipal Employees Retirement System’s private equity investments surged 15.8% during the first half of 2021 after losing 8.4% last year, according to Bloomberg.

The asset class has been boosted by approximately $580 billion in new deals during the first six months of 2021, which sets the industry on pace for its first-ever trillion-dollar year. That’s almost three times what firms reported during the first half of 2020, and it marks a 53% increase over the second half of last year, according to EY, which said the “high-water mark” for private equity deals was during 2006–2007, when private equity firms collectively reported more than $750 billion in deals.

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‘Crypto Mom’ Pushes Back Against SEC Over Poloniex Fine

Commissioner Hester Peirce says the regulator needs ‘sensible solutions’ regarding crypto exchanges.


US Securities and Exchange Commission (SEC) Commissioner Hester Peirce, also known as “crypto mom” for her support of cryptocurrencies, has criticized the regulator for fining crypto exchange Poloniex $10 million over charges it operated an unregistered online digital asset exchange.

The SEC announced last week that Poloniex agreed to pay more than $10 million to settle charges in connection with its operation of a trading platform that facilitated the buying and selling of digital asset securities. According to the SEC’s cease-and-desist order, the Poloniex trading platform met the definition of an exchange as defined by securities laws. The order also said that Poloniex did not register as a national securities exchange, nor did it operate under an exemption from registering as one.  

“Poloniex chose increased profits over compliance with the federal securities laws by including digital asset securities on its unregistered exchange,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement after the settlement was announced. “Poloniex attempted to circumvent the SEC’s regulatory regime, which applies to any marketplace for bringing together buyers and sellers of securities regardless of the applied technology.”

Without admitting or denying the SEC’s findings, Poloniex agreed to the entry of a cease-and-desist order and agreed to pay disgorgement, prejudgment interest, and a civil penalty for a total of just under $10.4 million.

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However, Peirce said in a statement that Poloniex was essentially damned if it did and damned if it didn’t because during the time it was operating, from mid-2017 through late 2019, the SEC was moving “very cautiously” regarding regulated entities’ engagement with crypto assets.

“Sure, Poloniex could have tried to register as a securities exchange or, more likely, as a broker/dealer [B/D] to operate an alternative trading system,” Peirce said, but added that “had it done so, it likely would have waited … and waited … and waited some more.”

She also said that given how slow the SEC has been in determining how regulated companies can interact with cryptocurrencies, “market participants may understandably be surprised to see us to come onto the scene now with our enforcement guns blazing and argue that Poloniex was not registered or operating under an exemption as it should have been.”

Calling for “sensible solutions,” Peirce said if crypto trading platforms such as Poloniex want to register with the SEC as an exchange or an alternative trading system, the regulator needs to answer several questions, including but not limited to:

  • How can a trading platform and its customers determine whether a particular digital asset is a security?
  • Would the conditions placed on their registration permit them to function as market makers or to facilitate trading on behalf of retail investors?
  • What are the mechanics of registering tokens sold as part of an investment contract as a class of “equity security” under the Exchange Act?
  • Can the platform custody client assets, a feature typical of centralized crypto trading platforms? If so, how, given concerns about custody of digital asset securities?
  • If a token was sold in a securities offering as part of an investment contract, how long must secondary transactions in that token be deemed to be securities transactions by platforms trading the tokens?

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