Public and Corporate Pension Funds are Taking Larger Piece of Private Equity Pie

NEW YORK - The ability to make mega commitments is leading public and corporate pension plans to constitute an ever-larger portion of the pool of committed private equity capital, according to the annual Sources of Capital survey from Dow Jones Private Equity Analyst.


The survey showed that in 2006, 26.6% of the capital raised by private equity firms came from public pension funds, with another 12.5% coming from corporations and corporate pension funds. That’s up from 22% and 10%, respectively, from the 2005 allocations, the survey found. As a result, the portion of the private equity pool funded by family offices, endowments & foundations and insurance firms, shrunk as a percentage of the total.

“With private equity firms raising larger and larger funds, they are seeking investors with enough capital to fill them up quickly,” said Jennifer Rossa, managing editor of the Private Equity Analyst. “The big public and corporate pension plans are fitting the bill as they seek out high-return investments.”

The annual survey also looked into the issues most important to private equity general partners. In order of importance, limited partners preferred (1) long-term investors, (2) investors who were knowledgeable about private equity and (3) who had the ability to commit quickly. Despite the prevalence of mega-commitments from corporate and public pension funds, the survey participants ranked the ability of limited partners to make large commitments only fourth in order of importance.

The 2006 survey represented more than 110 funds that raised more than $44 billion in capital.