Managers of the trillions of dollars in retirement investment for teachers, firefighters and other government workers in the U.S. and U.K. doubled down on private equity in 2018. The asset class accounted for 27% of public pension fund allocations last year, data from eVestment provided to Axios shows.
Why it matters: What is essentially public money is now being invested at higher levels than ever in private equity at a time when the asset class may be in for trouble.
By the numbers: Public pension plans announced 954 new private equity mandate awards — essentially buys or allocations to new assets — for 2018. This put private equity investments in the No. 1 spot for new allocations among these public pensions last year.
Watch out: More private equity managers are holding onto more cash than ever before, and are having to pay more for deals because of increased competition, often diluting returns and leading managers to take riskier bets.
The bottom line: "You have to think, 'Are there enough deals to profitably invest that level of dry powder?'" Byles Williams said. "I don’t know the answer to that question, but I would be skeptical."
