The California Public Employees Retirement System, the largest public pension fund in the country, announced new data on the performance and cost of its private equity portfolio dating back to 1990.
In that time, the pension fund has realized $24.2 billion in net gains, while external fund managers have realized $3.4 billion in fees and profit sharing agreements, according to a release from CalPERS.
For the 2015 fiscal year, the fund saw $4.1 billion in private equity net gains, while the external partners and managers of those investments realized $700 million in profit sharing agreements.
All told, CalPERS manages about $295 billion for about 1.7 million state worker participants.
The data on private equity performance comes from a newly created proprietary system to analyze the performance and cost of the fund’s private equity portfolio, called the Private Equity Accounting and Reporting Solution, or PEARS.
That new capability comes as the place of alternative investments like private equity and hedge funds have come under nationwide scrutiny for what critics claim are high expenses and questionable returns.
The new data on private equity’s performance in CalPERS’ overall portfolio will no doubt give evangelists of private equity new momentum in defending the value proposition of the complicated investments.
"Private equity has the highest net returns in our portfolio," said Ted Eliopoulos, CalPERS Chief Investment Officer, in a statement.
"As a long-term investor, it is an important piece of our investment strategy and our mission to provide pension benefits for generations to come,” he added.
The $29.3 billion of initial investments in private equity funds is now worth $53.5 billion, including the value of the original investment.
CalPERS’ total fund annual target return is 7.5 percent.
The new PEARS data shows private equity investments have surpassed the annual return benchmark for the three, five, 10, and 20-year periods, as well as the period marking the inception of private equity in CalPERS’ investment strategy, which began in 1990.
The past three-year return on private equity was 14.1 percent; the five-year return was 14.4 percent; the 10-year return was 11.9 percent; the 20-year return was 12.3 percent; since 1990, private equity returned 11.1 percent.
For context, the 10-year return on public equity was 7.9 percent, according to CalPERS 2014 annual report.
For that year, global public equity investments accounted for 52 percent of the CalPERS’ portfolio, which private equity accounted for 11 percent.
For the latest fiscal year, private equity returns were 8.9 percent net of fees, while returns on public equity were 1 percent, reflecting lackluster performance in stock markets in the U.S. and abroad.
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
