Key Takeaways
- • Private equity dramatically outperformed public equities at major U.S. pension funds in fiscal 2021, with CalSTRS achieving 51.9% PE returns versus 41.8% public equity returns, and CalPERS posting 43.8% PE returns against 36.3% public equity performance.
- • Mississippi's Public Employees' Retirement System reported exceptional PE performance of 58.87% for the past financial year, with private equity generating annualized returns of 24%, 21.72%, and 16.61% over three, five, and ten-year periods respectively.
- • Private equity has emerged as the top-performing asset class across multiple time horizons for leading pension funds, with CalPERS demonstrating a 10-year annualized PE return of 12.0% and 20-year annualized return of 10.1%, consistently outperforming all other asset classes.
- • Record fiscal year results were driven substantially by private equity holdings, with CalPERS' total net return reaching 21.3%, CalSTRS at 27.2%, and Maryland State Retirement and Pension System at 26.7%, all significantly boosted by outsized PE performance.
- • Pension funds have strategically positioned alternative investments as core holdings for long-term value generation, as evidenced by CalSTRS Chief Investment Officer Christopher J.'s statement that "we've built our portfolio for long-term performance, but this year's results were nothing short of spectacular."
Summary
The fiscal year ending June 2021 delivered exceptional returns for several of the largest public pension funds in the United States, with private equity investments emerging as the primary driver of outperformance. The data reveals a striking pattern: private equity returns substantially exceeded those of public equities across major institutional portfolios, reshaping the performance hierarchy of traditional asset classes.
CalSTRS, the California State Teachers' Retirement System, achieved a net return of 27.2% for fiscal year 2020-21, with private equity generating 51.9% returns compared to 41.8% from public equities—a spread of over 10 percentage points. Similarly, CalPERS, the California Public Employees' Retirement System with $469 billion in assets, posted a 21.3% total net return driven substantially by private equity's 43.8% performance versus 36.3% from public stocks. Maryland State Retirement and Pension System reported a 26.7% net return with private equity contributing 51.85% against 44.54% from public equities.
The performance advantage extends beyond single-year results. Mississippi's Public Employees' Retirement System delivered the most dramatic fiscal year performance with private equity returning 58.87%, while also demonstrating sustained outperformance on annualized bases: 24% over three years, 21.72% over five years, and 16.61% over ten years. Private equity maintained its position as the fund's top-performing asset class across all measured periods. At CalPERS, private equity has delivered a 10-year annualized return of 12.0% and a 20-year annualized return of 10.1%, consistently outperforming competing asset classes over extended time horizons. CalSTRS similarly reported that private equity outperformed all other asset classes across the three, five, and ten-year periods.
These results underscore the strategic value that major pension funds have attributed to private equity allocations within diversified portfolio construction. CalSTRS Chief Investment Officer Christopher J. characterized the performance as exceptional, noting that "we've built our portfolio for long-term performance, but this year's results were nothing short of spectacular," indicating that institutional managers view private equity not as a cyclical opportunity but as a core component of long-term wealth generation strategies.
CalSTRS, the California State Teachers' Retirement System, achieved a net return of 27.2% for fiscal year 2020-21, with private equity generating 51.9% returns compared to 41.8% from public equities—a spread of over 10 percentage points. Similarly, CalPERS, the California Public Employees' Retirement System with $469 billion in assets, posted a 21.3% total net return driven substantially by private equity's 43.8% performance versus 36.3% from public stocks. Maryland State Retirement and Pension System reported a 26.7% net return with private equity contributing 51.85% against 44.54% from public equities.
The performance advantage extends beyond single-year results. Mississippi's Public Employees' Retirement System delivered the most dramatic fiscal year performance with private equity returning 58.87%, while also demonstrating sustained outperformance on annualized bases: 24% over three years, 21.72% over five years, and 16.61% over ten years. Private equity maintained its position as the fund's top-performing asset class across all measured periods. At CalPERS, private equity has delivered a 10-year annualized return of 12.0% and a 20-year annualized return of 10.1%, consistently outperforming competing asset classes over extended time horizons. CalSTRS similarly reported that private equity outperformed all other asset classes across the three, five, and ten-year periods.
These results underscore the strategic value that major pension funds have attributed to private equity allocations within diversified portfolio construction. CalSTRS Chief Investment Officer Christopher J. characterized the performance as exceptional, noting that "we've built our portfolio for long-term performance, but this year's results were nothing short of spectacular," indicating that institutional managers view private equity not as a cyclical opportunity but as a core component of long-term wealth generation strategies.
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