Public Pension Fund Analysis
October 2014
2
Methodology
This study, conducted by the Private Equity Growth Capital Council uses data collected by Bison to examine
the private equity investments of over 150 U.S. public pension funds. The information was collected either
through direct communication with pension funds or from publicly available comprehensive annual financial
reports.
About Private Equity Growth Capital Council
The Private Equity Growth Capital Council (PEGCC) is an advocacy, communications, and research
organization established to develop, analyze, and distribute information about the private equity and
growth capital investment industry and its contributions to the national and global economy. Established in
2007 and formerly known as the Private Equity Council, the PEGCC is based in Washington, D.C. The
members of the PEGCC consist of the world's leading private equity and growth capital firms united by their
commitment to growing and strengthening the businesses in which they invest. More information about the
PEGCC can be found at www.pegcc.org.
About Bison
Bison is a financial technology company delivering software for analyzing private fund data. Bison’s
Performance Calculator empowers users to quickly identify and understand performance of funds and
portfolios relative to peer benchmarks and market indexes. The Private Equity Monitor covers news, events,
and performance data for fund managers and investors in the private equity and venture capital market.
The new Bison Benchmark covers all vintage years since 1990 and is built on transparent performance data
from LP reporting partners. Established in 2011, Bison is based in Boston, MA and clients include pension
plans, endowments, buyout and venture capital managers. Try Bison’s products free at www.bison.co.
3
Top 10 pension funds by private equity returns
Rank
Public Pension Fund
Annualized 10-Yr.
Private Equity Return
1
Teacher Retirement System of Texas
18.2%
2
Massachusetts Pension Reserves Investment Trust Fund
17.8%
3
Minnesota State Board of Investment
16.2%
4
Houston Firefighters’ Relief and Retirement Fund
15.8%
5
San Francisco Employees’ Retirement System
15.6%
6
Iowa Public Employees’ Retirement System
15.5%
7
Utah Retirement System
15.1%
8
New York State and Local Retirement System
14.9%
9
California State Teachers’ Retirement System
14.8%
Oregon Public Employees Retirement System
Pennsylvania Public School Employees’ Retirement System
14.3%
14.3%
10
4
Top 10 pension funds by dollars invested in private
equity
Rank
Public Pension Fund
Private Equity
Investment (Bil.)
1
California Public Employees’ Retirement System
$32.3
2
California State Teachers’ Retirement System
$21.9
3
Washington State Investment Board
$16.2
4
Oregon Public Employees Retirement System
$14.4
5
Teacher Retirement System of Texas
$14.4
6
New York State and Local Retirement System
$14.1
7
State of Wisconsin Investment Board
$10.0
8
Pennsylvania Public School Employees’ Retirement System
$9.2
9
Michigan Public School Employees’ Retirement System
$8.4
Ohio Public Employees Retirement System
$8.2
10
5
On a dollar-weighted basis, U.S. public pension
funds invest 9.4% of their portfolio in private equity
6.7%
Other
2.7%
Cash/Short-Term Inv.
8.0%
Real Estate
9.4%
Private Equity
50.2%
Public Equity
23.0%
Fixed Income
6
The penetration rate of private equity among the
largest U.S. public pension funds is high
89%
59
38
23
16
0%
0<5%
5%<10%
10%<15%
Number of Pensions by PE Allocation
7
6
15%<20%
20%<30%
7
Private equity investments outperform other asset
classes based on median 10-year annualized returns
Pension Fund Investment Return by Asset Class
Median 10-Yr. Annualized Return
14%
12%
12.3%
10%
8%
Total Fund Return 7.5%
7.9%
7.4%
6%
4%
5.6%
2%
0%
Fixed Income
Public Equity
Private Equity
Real Estate
8
The 25th percentile private equity return exceeds
the 75th percentile public equity return
10-Yr. Annualized Return
16%
14%
75th percentile
Median
12%
Mean
25th percentile
2.9% pts.
10%
8%
6%
4%
Sample Size
Total Fund
Fixed Income
Public Equity
Private Equity
Real Estate
No. of Pensions
81
70
74
35
42
Investment (Bil.)
$2,462
$570
$1,242
$237
$196
9
Over a ten year period, a $1 investment into private
equity returns $3.2
Return from $1 investment
Profit
Initial Investment
$3.5
$3.0
$2.5
$2.2
$2.0
$1.5
$1.1
$0.7
$1.1
$1.0
$1.0
$0.5
$0.0
Total Fund
Fixed Income
Public Equity
Private Equity
Real Estate
10
Notes on study
The reporting date for data used in this study ranges from March 31, 2013 to June 30, 2014, with most dates
as of June 30, 2013. When data as of June 30, 2013 were unavailable, information from the most recent
available financial report at the time of analysis (September 30, 2013) was used.
The breakdown of invested capital by pension funds is determined by summing the total dollars invested
within each asset class for all 153 public pension funds and calculating the percentage allocation of each
asset class.
The analysis of pension fund investment returns is based on available 10-year return data as of June 30, 2013
for each asset class. Using June 30th returns provides the largest sample size for all asset classes. Pension
funds typically report returns for private equity and other illiquid assets net of management fees and carry,
while marketable securities can be reported net or gross of fees.
The analysis of returns from a $1 investment by pension funds into each asset class is based on median 10year annualized returns as of June 30, 2013 for each asset class. Returns from a $1 investment are calculated
using the following formula, where x% represents the median 10-year annualized return for the specific asset
class: $1×(1+x%)^10
Not all pension funds report 10-year returns or returns for each asset class. Asset classes may be defined
slightly differently, depending on the pension fund.