Key Takeaways
- • Oregon's Public Employees Retirement Fund (OPERF), with roughly $100 billion under management, has underperformed its private equity benchmark (Russell 3000 plus 3%) over the past decade, according to an Oregon Journalism Project (OJP) investigation.
- • Last year Oregon's private equity portfolio returned 4.1%, versus 38.4% for the Russell 3000 benchmark cited in the reporting.
- • Only 18% of the fund is invested in stocks, compared with a consultant target of 27.5% from Meketa Investment Group, which the state paid $1 million over the past year.
- • OJP calculates that matching consultant and Oregon Investment Council (OIC) targets for stocks and private equity would have added about $1.4 billion to the fund's 2024 returns.
- • The poor returns have pushed the employer contribution rate to a record 27 cents per payroll dollar, forcing school districts and local governments to cut staff and services; the treasury plans to add about $2 billion more to private equity this year.
Summary
An Oregon Journalism Project investigation reports that the managers of Oregon's roughly $100 billion Public Employees Retirement Fund (OPERF) have kept heavy allocations to private equity despite consistent guidance from outside consultants to shift toward public stocks. According to the reporting, Oregon's private equity investments have trailed their benchmark, the Russell 3000 Index plus 3%, over the past 10 years, and they underperformed in every year but one over that decade. Last year the private equity portfolio returned 4.1%, against 38.4% for the Russell 3000 benchmark.
The consequences extend well beyond the state treasury. PERS now charges public employers 27 cents on every payroll dollar, the system's highest rate ever, to fund pensions for about 166,000 retirees and 249,000 future retirees. Estimates cited by OJP put the cost to school districts, cities and other employers at about $670 million over two years, and the Grant School District example shows how a $900,000 increase has forced staff reductions and program cuts.
Meketa Investment Group, which received $1 million from the state in the past year, has told the council that asset allocation is the most important decision the OIC makes. Its current stock target is 27.5%, yet only 18% of the fund is invested in stocks. OJP calculates that roughly matching the consultant and OIC targets for stocks and private equity would have produced about $1.4 billion more in 2024.
Treasury leadership has defended the strategy. Chief Investment Officer Rex Kim, who earns $810,030 and is the highest-paid state employee, says single-period performance is a misleading measure and that private equity has beaten the stock market over multi-decade cycles. Current State Treasurer Elizabeth Steiner said the fund invests on long-term goals and that the treasury does not chase one-year swings; the treasury plans to commit about $2 billion more to private equity this year. Former treasurer Tobias Read said no one can predict markets. Critics include Richard Ennis, a pension consultant, who said Oregon has 'underperformed its private equity benchmark by a significant margin,' and Rick Pope of Divest Oregon, who said the treasury has allocated well beyond its policy.
The article attributes the strategy partly to history: Oregon made an early private equity commitment in 1978 and later large buyout bets, and former OIC member Mark Gardiner described a culture in which staff and consultants controlled the agenda. Other large plans, including the Teachers Retirement System of Texas and Yale University's endowment, have recently reduced private equity exposure.
The consequences extend well beyond the state treasury. PERS now charges public employers 27 cents on every payroll dollar, the system's highest rate ever, to fund pensions for about 166,000 retirees and 249,000 future retirees. Estimates cited by OJP put the cost to school districts, cities and other employers at about $670 million over two years, and the Grant School District example shows how a $900,000 increase has forced staff reductions and program cuts.
Meketa Investment Group, which received $1 million from the state in the past year, has told the council that asset allocation is the most important decision the OIC makes. Its current stock target is 27.5%, yet only 18% of the fund is invested in stocks. OJP calculates that roughly matching the consultant and OIC targets for stocks and private equity would have produced about $1.4 billion more in 2024.
Treasury leadership has defended the strategy. Chief Investment Officer Rex Kim, who earns $810,030 and is the highest-paid state employee, says single-period performance is a misleading measure and that private equity has beaten the stock market over multi-decade cycles. Current State Treasurer Elizabeth Steiner said the fund invests on long-term goals and that the treasury does not chase one-year swings; the treasury plans to commit about $2 billion more to private equity this year. Former treasurer Tobias Read said no one can predict markets. Critics include Richard Ennis, a pension consultant, who said Oregon has 'underperformed its private equity benchmark by a significant margin,' and Rick Pope of Divest Oregon, who said the treasury has allocated well beyond its policy.
The article attributes the strategy partly to history: Oregon made an early private equity commitment in 1978 and later large buyout bets, and former OIC member Mark Gardiner described a culture in which staff and consultants controlled the agenda. Other large plans, including the Teachers Retirement System of Texas and Yale University's endowment, have recently reduced private equity exposure.
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