The American Investment Council Lists PE as Top Asset for Pensions

August 28, 2019 | Private Equity

In an impressive run, private equity has topped the returns table at pensions for seven consecutive years.

An American Investment Council (AIC) survey US public pension funds found that private equity (PE) is a star-performing asset class. The 165 participating pension funds comprise investments of over 20 million public sector workers and retirees.

Here are the key statistics from the American Investment Council report.

  • Pensions with exposure to PE: 91%
  • PE annualized returns over ten years to 2018: 10.2%
  • Equities annualized returns over the same period: 8.5%
  • Fixed income and real estate return over the same period: 4.8%
  • Pension with the highest annualized returns: 13.63% for the Massachusetts Pension Retirement Investment Trust
  • Largest PE investment $27.19 billion by CalPERS

American Investment Council says:

AIC Director of Research Jamal Hagler offered his interpretation of the survey data.

“Private equity investments allow pension funds to earn healthy returns and invest in growing companies not available on public markets,” said Hagler. “For these reasons, pensions across America will continue to turn to private equity to ensure that they can meet their financial obligations.”

However, new challenges have emerged for pensions in a low-interest-rate environment. For the first time in a decade, the yield on the 30-year Treasury bond fell below the dividend yield of the S&P 500 this week.

With more monetary easing to come, pensions may be forced to accept negative yields.

“It is financial vandalism, and the government and central banks need to wake up to this,” said Mark Dowding, chief investment officer at BlueBay Asset Management.

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