(October 5, 2012) — A $1 investment by pension funds in private equity has yielded a return of $2.30 over 10 years, easily outstripping gains from stocks, bonds and real estate.
These assertions come from a report released by the Private Equity Growth Capital Council, a Washington, DC-based lobbying, advocacy, and research organization. The firm is “focused on defending and promoting the private equity and growth capital investment industry,” as noted on its Wikipedia page.
Another claim by the firm: Pension funds’ investments in private equity outperform other asset classes based on median 10-year annualized returns, based on an analysis among 151 public pension funds. “There is no question of the value of private equity to public pension funds,” says Steve Judge, president and CEO of PEGCC, in a statement. “Private equity delivers for retirees and workers across the United States, helping secure the retirements of millions of Americans and strengthen the organizations they work for.”
The report by the Private Equity Growth Capital Council also found that the asset class in question accounts for 9.6% of large public pension fund allocations and that pension private equity portfolios in the lower quartile yield better 10-year annualized returns than the upper quartile of public equity portfolios by nearly 2%.
So does this report by a private equity “lobbying” association hold weight?
According to Barry Feldman, a senior research analyst at Russell Investments, the research firm’s report must be viewed with a grain of salt due to the opaqueness of the asset class. Stellar gains in private equity must be viewed with skepticism, according to Feldman, due to the sector’s lack of liquidity and high fees that cut into overall returns for institutional investors.
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