Some U.S. pension funds are reducing their new investments in private equity after increasing their allocation into the illiquid asset class over the past decade.
Alaska's $77B pension fund may cancel a planned ramp-up of private equity investing, and the $615M pension fund of California's Mendocino County chose not to introduce private equity investments into its strategy last month.
U.S. pension and investment funds are joining other institutional investors in the broader pull-back from private equity investing, which can offer high returns on hard-to-sell assets.
- According to Bain & Co., global buyout deal value fell by 35% last year to $654B. Despite the slowdown, 2022 was still the second-best year ever for private equity returns, after 2021.
- The Maryland State Retirement and Pension System aims to reduce its annual private equity allocations from 21.6% to 16%.
- Some pension funds, like the $444B California Public Employees’ Retirement System, are bucking the trend by expanding their private equity portfolio from 8% to 13% of assets under management.
Zoom Out:
- According to Bain, the private equity industry ended 2022 with a record $3.7T in available capital but dealmaking activity decreased due to a number of factors.
- The consultancy predicted that private equity firms will re-commit to dealmaking when macroeconomic uncertainty clears up.
