The $35 billion (€23 billion) Pennsylvania State Employees’ Retirement System’s private equity real estate investments returned 22 percent last year, net fees – an increase of almost a third over the previous 12 months.
PA SERS saw returns of 22.6 percent on its real estate investments in 2007, compared to 17.6 percent in 2006 – an increase of 28.4 percent.
Overall returns on investments last year were 17.2 percent, which it says is nearly double the median return for large US public pensions, and surpassed its 12.8 percent benchmark. Private equity was the pension’s top performing asset class, returning 41 percent compared to 23.2 percent in 2006.
The pension’s chairman, Nicholas Maiale, noted that the returns place it among the top 5 percent of large public pensions “not only for 2007 but also over the long term, as well”.
However he cautioned: “The struggling financial markets at the outset of 2008 should remind us that it may not be possible to meet, let alone outperform, our investment goal every year. Should earnings fall short of assumptions, projected rates would rise.”
PA SERS recently made four follow-on investments to private equity funds. It committed up to $50 million to ABRY Partners VI, a US media-focused fund; up to $50 million to Asia Alternative’s second fund, $20 million of which is allocated to co-investments; up to €50 million in Bain Capital’s third European fund; and up to $10 million for CVI Global Value Fund, CarVal Investors’ $6 billion fund targeting loan portfolios, real estate, corporate securities and special situations.
PA SERS also approved commitments of up to $50 million for Advent International’s sixth North American and European buyout fund, targeting €5 billion, and up to $25 million to Patriot Capital Partners, which provides debt and growth equity to small, middle-market companies.
The pension allocates around eight percent of its assets to real estate and 13 percent to private equity and is advised by Cambridge Associates as well as Hamilton Lane, Pathway Capital and Amaranth Advisors.