US. Private equity leads public pension returns for 14th straight year

Private equity has again outperformed every other asset class in U.S. public pension portfolios, delivering a median annualized return of 13.2% over the 10-year period ending June 30, 2025, according to the American Investment Council's (AIC) 2026 Pension Trends Report. The annual study analyzed 200 U.S. public pension funds representing nearly 34 million public-sector workers and retirees. According to the Washington, D.C.-based AIC, private equity has ranked as the highest-returning asset class in public pension portfolios every year since 2012.

AIC President and CEO Will Dunham said in a statement that private equity has consistently been the highest-performing asset class for public pension funds across the country. Individual fund results were strong at the top of the distribution. The Vermont Pension Investment Commission posted a 10-year annualized private equity return of 16.61%, followed by the School Employees Retirement System of Ohio at 16.27%, MassPRIM at 16.18%, and the West Virginia Investment Management Board at 16.12%. The Tennessee Consolidated Retirement System, ranked fifth at 16.04%, said its private equity program has helped push the fund to a funded status exceeding 100%, according to CIO Michael Brakebill. The Illinois State Board of Investment tied for tenth place with a 15.20% annualized return, exceeding the national median by more than 200 basis points, per CIO Dipesh Mehta.

The study found that 86% of public pension funds reviewed invest a portion of their portfolios in private equity, and on a dollar-weighted basis the asset class accounts for approximately 13% of total public pension fund assets. Pension chief investment officers cite the illiquidity premium, the additional return investors earn for locking up capital, as the justification for the allocation. The AIC report also surveyed endowments and foundations, where private equity led with a median annualized 10-year return of 11.78%, ahead of public equities at 9.77%. Returns are reported net of management fees and carried interest, though the AIC noted that calculation methodologies may vary across pension funds.

The findings arrive as policy debate over private markets in retirement plans continues. The U.S. Department of Labor proposed a rule in March 2026 establishing a formal safe harbor that would allow 401(k) plan fiduciaries to include alternative assets, including private equity, in defined contribution menus. The AIC data is likely to feature prominently in that debate.