(June 25, 2012) — Private equity investments – and the foresight for getting in early – made by the Oregon Public Employees Retirement System (OPERS) have in the past ten years returned the fund $4 billion more than if they had held their entire portfolio in public markets, the managers of the fund have claimed.
A decision in 1981 by the Oregon Investment Council (OIC) to invest in private equity has this decade alone netted the fund $4 billion more in returns than would have been earned by public equity investments, a column published on Oregonlive.com asserted. Penned by Ted Wheeler, Oregon’s treasurer, and Keith Larson, the chairman of the OIC, the piece asserted that the bulk of OPERS’ success is due to the decision to allocate to private equity.
“The Oregon Investment Council recognizes that there are trade-offs with every kind of investment,” it read. “We are unanimous in our belief that the trade-offs of private equity are worth it for Oregon and are key to the sustainability of [O]PERS.”
“Private equity funds are diverse, yet all rely on the premise that intensive research can uncover the best opportunities, many of them privately owned companies with high growth potential. Some of the deals involve buyouts… Private equity is a vital part of the strategy of seeking out the best value and returns for Oregonians.”
Larson and Wheeler noted that, since 2002, the time-weighted annual return for the fund’s private equity investments was 11.35%, whereas its investments with the S&P 500 returned 4.71%. At last count, OPERS had 24% of its portfolio allocated to private equity.
Pension funds and institutional investors around the world are diving into alternatives as public equities and fixed income investments lose their luster. Last week, a study by Preqin revealed that North American endowments upped their allocation to private equity from 8.4% in 2007 to 13.2% in 2012. 94% of institutions surveyed by the firm intended to increase or maintain their exposure to private equity in the future.
To read the column published on Oregonlive.com, click here.