Things were looking good for one of the private equity world’s consistent public pension limited partners. The Pennsylvania State Employees’ Retirement System (SERS) announced that it posted returns that were double the median for U.S. public pension funds. The Harrisburg, Pa.-based LP also said that private equity had the best returns among its asset classes.
The pension system said it earned $3.8 billion last year with an investment return of 14.9%. This was a slight drop from 2004’s 15.1% return and a further decline from the 24.3% the system earned in 2003. SERS had a three year compounded annual return of 18 percent.
Despite this decline, the system still found itself well above the median return rates for public pension funds. The pension system cites a Wilshire Associates report that lists the median return rate for public pensions last year as 7.55 percent. The returns also puts Pa. SERS in the top 5% of public pension funds in 2005 performance and its 10-year compounded returns are in the top quarter of all funds, according to Peter Gilbert, SERS’ chief investment officer.
Gilbert said in a statement announcing the returns that the pension system’s returns were the result of its “strategy of broad diversification across asset classes globally, including non-traditional asset classes.” Private equity led the top performing asset classes with returns up 36.5 percent. Real estate was the second-best performer with returns up 30.9 percent.
SERS manages approximately $29 billion and its portfolio includes Apax Partners, New Enterprise Associates, Summit Partners, Lexington Partners, Morgenthaler Ventures and HarbourVest Partners. At its last quarterly announcement in December, SERS committed another $230 million to five private equity funds. The pension system is one of the United States’ oldest and was founded in 1923.