"Buyout funds raised $200 million in 1980 and $200 billion in 2007. According to Prequin, a financial data provider, public pension funds were the biggest contributors over that period and now have $115.9 billion invested in private equity," the Times wrote.Over at Calpensions.com, Ed Mendel details the extensive use that Calpers and Calsters, the state's two huge pension funds, have made of private equity investing.
"The California Public Employees Retirement System, after investments plunged from $260 billion in fall 2007 to $160 billion in March 2009, increased its private equity target from 10 to 14 percent of the portfolio. The fund was $226.5 billion last week.
The California State Teachers Retirement System, which fell from $180 billion in October 2007 to $112 billion in March 2009, increased its private equity target from 9 to 12 percent of the portfolio. Its fund was $146 billion on Nov. 30."
Private equity investing has been good for the funds, and for California taxpayers.Mendel notes that the year over year return at Calpers from private equity investments was nearly 29 percent, and the average over 10 years was a robust 8.9 percent, or far above what the funds have been earning in the public stock markets.
Will the funds be pressured to turn their backs on private equity as the debate heats up, which it is sure to do if Romney garners the GOP nomination? Can our seriously underfund public pension funds afford to forgo those kinds of returns when their other investments are performing so poorly?