Key Takeaways
- • U.S. pension funds' private-equity allocations rose to an average 8.9% of holdings in 2021, marking three consecutive years of growth, according to analytics firm Preqin.
- • Roughly $480 billion of state and local pension fund assets tracked by the Federal Reserve were invested in private equity in 2021, up from about $300 billion in 2018.
- • Government retirement plans are expanding private-equity exposure record amounts as they seek to close funding shortfalls, despite concerns about risk and cost.
Summary
Government retirement funds are committing record sums to private equity, continuing to increase allocations despite persistent concerns about the asset class's risk and fees. The motivation, as reported by The Wall Street Journal, is the need to close pension funding shortfalls.
According to analytics company Preqin, U.S. pension funds' private-equity investments grew to an average of 8.9% of total holdings in 2021. That followed three straight years of increases in the allocation.
Based on Federal Reserve data cited in the report, state and local pension fund assets held in private equity totaled roughly $480 billion, up from about $300 billion in 2018. The figures indicate that the increase in dollar terms over the period has been substantial, driven by both rising allocations and growth in the broader pension asset base.
The trend highlights a continued institutional appetite for private markets among public pension plans, even as critics question the risk and cost profile of these investments. The primary source does not provide further detail on specific fund managers or individual commitments.
According to analytics company Preqin, U.S. pension funds' private-equity investments grew to an average of 8.9% of total holdings in 2021. That followed three straight years of increases in the allocation.
Based on Federal Reserve data cited in the report, state and local pension fund assets held in private equity totaled roughly $480 billion, up from about $300 billion in 2018. The figures indicate that the increase in dollar terms over the period has been substantial, driven by both rising allocations and growth in the broader pension asset base.
The trend highlights a continued institutional appetite for private markets among public pension plans, even as critics question the risk and cost profile of these investments. The primary source does not provide further detail on specific fund managers or individual commitments.
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