Private equity investments were the No1 choice for US & UK public pensions in the third quarter of the year with 233 new allocation commitments announced by plans tracked by eVestment.
Private equity investments held the No1 spot in Q1 (with 210 allocations) and Q2 (with 294) of 2018 as well, according to eVestment, continuing a trend of strong interest in private equity among public pensions that eVestment began tracking in 2017.
Equity strategy investments held the No2 spot in Q3 2018, with 193 allocations from the public pensions tracked. Commitments to equity strategy investments have been consistently strong throughout 2018 and 2017, with commitments landing in triple digits each quarter tracked.
Direct real estate investments made a surge in the second and third quarters of this year, with public pensions making 167 investments in real estate in Q2 2018 and 133 in Q3, compared to only 96 such direct real estate investments in Q1 2018.
“The continued interest in private equity investment among public pensions over the past two years and the recent surge in real estate investment among these pensions shows a trend of pensions continuing to explore alternatives as they look for yield at appropriate risk levels,” says John Molesphini, eVestment’s global head of strategic engagement.
One implication of public pensions’ increased interest in private markets and other alternative investments is the higher level of transparency public pensions require, a level of transparency which may be new to many of these managers.
“Because public pensions have a variety of stakeholders they are accountable to when making investments, private markets and other alternative managers who seek to win public plan assets will need to comply with their transparency standards,” says Molesphini.
This transparency can include managers sharing their data via tools like eVestment’s TopQ, which allows investors interested in private equity, real estate and other alternative investments to assess and compare alternative opportunities in a way that is now standard among traditional and hedge fund investment managers.
