These Are the Top Private Equity Pension Funds in America

Private equity is a hot asset class for investors. For starters, it’s a great diversifier. It also does very well for its holders over short and long terms. And the top public pension funds for PE hail from Massachusetts, Ohio, and Minnesota.

For American pension funds, private equity has generated an aggregate 10.2% return over the past 10 years, according to the American Investment Council, which just released its annual public pension study.

The 165 US public pensions in the study held about 8.7% of their investment portfolios in private equity as of June 30, 2018, and atop them are the Massachusetts Pension Reserves Investment Trust ($72.2 billion), Ohio School Employees Retirement System ($14.10 billion), and the Minnesota State Board of Investment ($95.7 billion). They’ve returned 13.63%, 13.3%, and 11.7%, respectively, over the past 10 years, allocating 10.8%, 9.9%, and 14.7% of their portfolios to the class.

Massachusetts has been in the top five of each of the council’s seven annual surveys, which Chief Investment Officer Michael Trotsky said “reinforces the importance of our PE portfolio to Mass PRIM’s overall performance.”

This year, slots four, five, and six belong to the Los Angeles County Employees’ Retirement Association ($57 billion), the Public Safety Personnel Retirement System of the State of Arizona ($9.8 billion), and the West Virginia Investment Management Board ($19.5 billion). Their private equity holdings have generated 11.4%, 11.36%, and 11.22%, respectively; and they allocate 9.5%, 13.8%, and 9.5% to the space.

“LACERA’s mission is to produce, protect, and provide the promised benefits to our 165,000 members,” CIO Jonathan Grabel told CIO. “Private equity investments have been and are an important strategy within our total portfolio such that we can achieve this mission.”

The $19.6 billion Kansas Public Employees Retirement System and the $4.1 billion Houston Firefighters’ Relief and Retirement Fund tie as far as their 10-year 11.10% returns go, but allocations differ. Houston’s firefighter plan puts 13% to the area while Kansas did not disclose how much it invests in private equity as it is housed in its alternatives portfolio, which is about 8% of the total assets under management.

Rounding out the American Investment Council’s top 10 decade-long earners are the $5.2 billion Kentucky Retirement System Insurance Fund and the $3.2 billion Nashville & Davidson County Metropolitan Government Employees Benefit Trust Fund. Despite Kentucky’s pension problems, the plan’s private equity investments have returned 11.02% over the 10-year period with a current allocation of 10.5% of the total portfolio. Nashville and Davidson County’s metropolitan fund returned 10.90% in that time. About 18.7% of its assets are in the space.
 

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