Key Takeaways
- • Mendocino County's pension fund is seeking to exit private equity, with consultant Callan arguing that adding PE would not meaningfully improve portfolio returns over the next decade.
- • Callan cites fees and sluggish returns as the core reasons for recommending the pension skip private equity allocations, a rare position for a major investment consultant.
- • The move, reported by PEI on 14 February 2023, signals growing institutional skepticism about the net-of-fee value of private equity for public pension plans.
Summary
Mendocino County's pension fund is moving to skip private equity, with its adviser Callan arguing that adding the asset class to the portfolio would not significantly improve returns over the next decade, according to PEI Private Equity. Callan's position is described as a rare one for a major consultant, which typically advises institutional clients to maintain or build private markets exposure.
The case rests on two primary concerns: fees and sluggish returns. Callan's analysis suggests that the expected return uplift from private equity, after accounting for the fee load typical of the asset class, does not justify the allocation over the coming ten-year horizon. The consultant's view implies that the net-of-fee benefit of private equity may be narrower than headline performance figures suggest.
The decision highlights a broader debate among public pension trustees about the cost and return profile of private equity. For allocators weighing private markets exposure, the Mendocino case is a notable data point that a major adviser is questioning the marginal return contribution of PE, particularly relative to fees. The article is brief, and further detail on specific allocation sizes, fee figures, or the fund's formal vote is not available in the source material.
The case rests on two primary concerns: fees and sluggish returns. Callan's analysis suggests that the expected return uplift from private equity, after accounting for the fee load typical of the asset class, does not justify the allocation over the coming ten-year horizon. The consultant's view implies that the net-of-fee benefit of private equity may be narrower than headline performance figures suggest.
The decision highlights a broader debate among public pension trustees about the cost and return profile of private equity. For allocators weighing private markets exposure, the Mendocino case is a notable data point that a major adviser is questioning the marginal return contribution of PE, particularly relative to fees. The article is brief, and further detail on specific allocation sizes, fee figures, or the fund's formal vote is not available in the source material.
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