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Increases in Private Equity Target Allocations from US Public Pension Funds – October 2013

by Joanna Nye

  • 22 Oct 2013
  • PE

A number of US-based public pension funds have continued to make new private equity fund commitments in recent months in order to increase their level of exposure to the asset class in the longer term. As a result, many public pension funds have increased their overall target allocations to private equity in order to have the capability of committing more to the asset class.

Q3 2013 saw a number of US public pension funds making increases to their private equity target allocations, including Oregon State Treasury, which increased its target allocation from 16% of total assets to 20%. Other US-based public pension funds which recently made changes to their private equity target allocations include Pompano Beach Police & Firefighters' Retirement System, which doubled its target allocation to private equity from 2.5% of total assets to 5%, and California State Teachers' Retirement System, which increased its target allocation from 12% of total assets to 13%.

Preqin’s Investor Intelligence currently tracks 5,240 active investors in private equity, 295 of which are US-based public pension funds. US pension funds currently have an average target allocation to private equity of 8.3% of total assets, an increase from the average target allocation of the investor type in October 2012, which stood at 7.9% of total assets.

Continued LP appetite for private equity, and a growth in LPs’ target allocations to the asset class, is not however limited to US-based public pension funds. A study carried out by Preqin in December 2012 covering a range of LP types, across a number of geographic regions, found that 28% of LPs were looking to increase their private equity allocations over the next 12 months, with 33% looking to increase their allocations in the longer term. A similar study carried out in June 2013 saw an increase in the number of LPs looking to increase private equity allocations, with 31% looking to increase their private equity allocations over the next 12 months, and 34% looking to increase their allocations in the longer term.

US public pension funds’ continued appetite for private equity has been reflected by a number increasing their long term target allocations to private equity during recent months. The investor type looks likely to continue to be a key player in the asset class going forward, with 39% of US public pension funds looking to make new fund commitments over the next 12 months, 81% of which plan to make their next commitments in the immediate future.

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