NYC Pensions' Push Into Private Equity Yields Index-Fund Returns
- Private equity gains for NYC’s two biggest funds lag benchmark
- After scattershot approach, a new focus on some 60 firms
Central Park stands next to the Harlem neighborhood of Manhattan in this aerial photograph taken over New York, U.S., on Saturday, Oct. 2, 2010. New York City sold $775 million in Build America Bonds as international buyers purchased about 16 percent of the debt, the most in the city's history.
Photographer: Andrew Harrer/BloombergNew York City’s biggest pensions have invested about $13 billion with private-equity firms in pursuit of large returns. They would have done better with a low-cost stock index fund.
The city’s $63 billion teachers’ and $58 billion civil employees’ funds have earned an annualized return of 9.15 percent and 9.1 percent after fees, respectively, on their buyout, venture capital and “special situations” funds since the late 1990s. That’s less than the 9.5 percent they would have earned by putting the money into the Russell 3000 -- the stock-market benchmark the plans expect their private-equity portfolios to beat by 3 percent a year.