Key Takeaways
- • Private equity delivered a median annualized return of 13.5% over the 10-year period through 2024, outperforming all major asset classes including public equity, real estate, and fixed income in public pension portfolios.
- • The American Investment Council's 2025 study analyzed 200 U.S. public pension funds and found that 85% of surveyed pensions maintain some exposure to private equity, with more than 90% of institutional investors planning to increase or maintain their allocations long-term.
- • Approximately 34 million U.S. public servants—including first responders, schoolteachers, and government employees—rely on private equity investments within their pension funds to secure retirement income.
- • Cambridge Associates research confirms that institutions with higher private investment allocations historically experienced both higher returns and lower volatility compared to those with lower allocations.
- • The American Investment Council's annual analysis spanning since 2012 consistently demonstrates that private equity has been the best-returning asset class in public pension portfolios every single year over that 13-year period.
Summary
The American Investment Council released its 2025 public pension study on July 17, demonstrating that private equity continues to be the highest-returning asset class for U.S. public pension funds. The study analyzed 200 public pension funds and found that private equity investments delivered a median annualized return of 13.5% over a 10-year period, surpassing public equity, real estate, and fixed income across all measured timeframes.
According to AIC President and CEO Will Dunham, the consistency of private equity's outperformance is particularly significant given current economic conditions. "Year after year, private equity has outperformed every major asset class over the long term, offering reliable and robust returns even during periods of economic volatility," Dunham stated. The study emphasizes that approximately 34 million American public servants—including first responders and schoolteachers—depend directly on these returns to secure their retirements.
The institutional appetite for private equity exposure remains robust. The research found that more than 90% of institutional investors are planning to either increase or maintain their current allocations to private equity over the long term. Additionally, 85% of public pensions in the study sample maintained some level of exposure to private equity, underscoring the broad acceptance of the asset class within the institutional investor community.
Independent research from Cambridge Associates corroborates the AIC findings, revealing that institutions with higher private investment allocations experienced superior historical returns alongside lower volatility. This dual benefit—enhanced performance combined with reduced portfolio volatility—addresses a key concern among pension managers balancing return requirements with risk management obligations to their beneficiaries.
The 2025 study extends a 13-year track record of analysis. Since 2012, the AIC's annual research has consistently identified private equity as the best-returning asset class within public pension portfolios, demonstrating both durability and resilience of private equity performance across varying macroeconomic environments and market cycles.
According to AIC President and CEO Will Dunham, the consistency of private equity's outperformance is particularly significant given current economic conditions. "Year after year, private equity has outperformed every major asset class over the long term, offering reliable and robust returns even during periods of economic volatility," Dunham stated. The study emphasizes that approximately 34 million American public servants—including first responders and schoolteachers—depend directly on these returns to secure their retirements.
The institutional appetite for private equity exposure remains robust. The research found that more than 90% of institutional investors are planning to either increase or maintain their current allocations to private equity over the long term. Additionally, 85% of public pensions in the study sample maintained some level of exposure to private equity, underscoring the broad acceptance of the asset class within the institutional investor community.
Independent research from Cambridge Associates corroborates the AIC findings, revealing that institutions with higher private investment allocations experienced superior historical returns alongside lower volatility. This dual benefit—enhanced performance combined with reduced portfolio volatility—addresses a key concern among pension managers balancing return requirements with risk management obligations to their beneficiaries.
The 2025 study extends a 13-year track record of analysis. Since 2012, the AIC's annual research has consistently identified private equity as the best-returning asset class within public pension portfolios, demonstrating both durability and resilience of private equity performance across varying macroeconomic environments and market cycles.
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