Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

We Hear You: PERA and Private Equity

Private Equity

New video series answers your questions about PERA’s investment program.

What is private equity? Why does the PERA portfolio contain private equity investments? How have these investments performed and how much are the fees?

In recent months, the wisdom of public pensions’ continued investment
in private equity has been questioned. Although some observers have criticized
these vehicles, private
equity
remains one of the highest expected returning asset classes
in Colorado PERA’s investment portfolio. The costs of participating in private
equity are higher than for publicly traded assets, but the expectations for
performance in this asset class are also higher. Over time, the private equity asset
class has outperformed the public markets and delivered higher returns to the
PERA fund.

Private equity is complex and PERA has received many questions
about how it is managed and its role in context of the broader portfolio. While
the PERA website offers extensive information
about these practices – everything from asset allocation to performance metrics
– there is now a new series of brief videos that provide clear answers to these
questions and more.

The most recent video in this series is PERA and private equity, which explains why private equity remains such a valuable and productive part of PERA’s investment portfolio. Other videos in the series include PERA’s Investment Program, a general overview, and PERA’s Investment Benchmarks, which provides a concise look at how PERA’s investment team works with the PERA Board of Trustees to establish performance targets for the portfolio. Watch the videos below, on the copera.org website, or on PERA’s YouTube channel.

Have a question? Please keep them coming using this link;
future videos will be based on your questions and will include information
about the work we do for you.

We Hear You Video: PERA and Private Equity

Additional Resources:

PERA
investment management fees fact sheet

Why
enhanced investment transparency creates a new set of risks

PERA’s
private equity Portfolio

Asset classesA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.Asset allocationAn investor’s mix of stocks, bonds, and other investments. PERA’s strategic asset allocation is set by the PERA Board of Trustees.Private equityA type of investment in which investors purchase shares of a company that is not traded on a public stock exchange.Private equityA type of investment in which investors purchase shares of a company that is not traded on a public stock exchange.Private equityA type of investment in which investors purchase shares of a company that is not traded on a public stock exchange.BenchmarkA tool used to measure performance. For example, an investor can use a stock index as a benchmark to measure his/her own investment performance compared to the market as a whole.Asset classA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.Asset classA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.

Comments

  1. Dr. Vic DeRosia says:

    Now is the time to be progressive and start paying teachers a salary the can live with and invest in. TABOR MUST BE REPEALED.

  2. Barry Northrop says:

    PERA’s investments have done so well that legislation is continually needed to reduce benefits and increase contributions. The positive spin on PE is just another example of wishful thinking and backslapping your failed management.

    • Walter L Johnson says:

      A lot of the reduction in benefit expectations is due to the state legislature stealing money from PERA by offering an early retirement program with zero dollars transferred to PERA to pay the cost not that long after TABOR, and then dropping the 1.5% of payroll contribution the state was making to cover the cost of living adjustments retroactively without looking ahead to the cost of maintaining it, and finally adding political judgements to suitable investments. However, even having said that unless annual returns start to return to historical levels the future doesn’t look that bright. The 20 years I worked for the state the actual rate of return was equal to an annually compounded 11%, even though the actuarial assumed rate of return was around 8%. This same factor though also impacts Social Security Retirement benefits directly because those Trust Funds can only be invested in U. S. Treasury debt by law.

      Unless wages rise substantially, such that the payroll taxes and PERA contributions bring in larger than expected revenue, retirees are going to continue to get stiffed and the Social Security Law explicitly states that if annual payroll tax and trust funds are not sufficient to pay expenses for benefits, the benefits will be reduced. It is projected that could translated into a 32% reduction in benefits unless Congress finds other funds.

  3. Philip Gehlich says:

    The “PERA and Private Equity” video tells us nothing. It only raises questions. Sure, past returns may have out-performed publicly-traded securities, but why have the risk factors not been addressed? What are some examples of these investments? Is there NO transparency to these investments?

  4. Colorado PERA says:

    Dear Mr. Gehlich,

    Thank you for your questions. Risk in the investment portfolio is addressed through asset allocation and guided by the Statement of Investment Policy: https://www.copera.org/sites/default/files/documents/investmentpolicy.pdf

    More details on the Private Equity asset class are available in this post: https://www.peraontheissues.com/index.php/2018/05/02/asset-class-private-equity/

    In particular, please see the reporting of returns for Private Equity (funds PERA has invested in since inception of the asset class in the early 1980s) here: https://www.copera.org/sites/default/files/documents/altinvest.pdf

    Fee information is here: https://www.peraontheissues.com/wp-content/uploads/2018/05/PERA-Investment-Fees-Fact-Sheet.pdf

  • Share

  • Print