PSRS/PEERS Private Equity Program Among Top Performers in U.S.
The 2021 Public Pension Study from the American Investment Council (AIC) ranks the PSRS/PEERS private equity portfolio sixth out of 178 U.S. public pension plans studied. The ranking is based on private equity investment returns for a 10-year period ending June 30, 2020. (Read the study here.)
According to the AIC, PSRS/PEERS’ private equity program achieved a 10-year annualized return of 14.7%, well above the median return of 12.3% for all plans included in the study.
Private equity investments are just one part of the successful investment program managed by PSRS/PEERS. The Systems’ investments are used to fund current and future benefits for PSRS/PEERS members. More than 60% of the funding for those benefits comes from the Systems’ investments.
“We are very pleased with the results we have been able to achieve through the private equity portfolio,” said PSRS/PEERS Chief Investment Officer, Craig Husting. “It is an important alternative to investments in public markets, and has proven to be a valuable piece of our investment portfolio.”
What is Private Equity?
Basically, private equity includes investments made directly in private companies or by participating in buyouts of (sometimes distressed or poorly performing) private companies. Private equity investment funds are often used to improve the business in which they are invested, or to assist them in making changes or improvements to their operations, physical plant or services.
The Role of Private Equity in the PSRS/PEERS Portfolio
The PSRS/PEERS Private Equity Program was started in 2003 to generate long-term returns, increase the diversification of the portfolio (basically – using a variety of types of investments to avoid the “having all your eggs in one basket” scenario), and to help reduce total portfolio investment risk. These principles are fundamental to the PSRS/PEERS investment philosophy.
By its nature, building a portfolio for private investments is a long-term process, and takes years to develop and implement.
“To date, private equity has produced net-of-fees returns significantly greater than the returns achievable in publicly traded stocks,” said Husting, who added, “We look forward to continued growth in this part of our investment portfolio.”
Private equity represented approximately 15.7% of the total portfolio during the 2020-2021 school year, and returned in excess of 61%.
PSRS/PEERS Investment Asset Allocation by Type*
As of June 30, 2021
The market value of all invested assets for PSRS and PEERS combined were approximately $56.4 billion on June 30, 2021, making the joint entity larger than all other public retirement plans in Missouri combined, and the 46th largest defined benefit plan in the United States.