$85.3 billion PSERS said private equity was the biggest drag on returns, knocking 0.59 percentage points off overall performance and helping leave the teachers’ pension fund $41 billion short.
$10.1 billion of private-equity holdings returned just 2.59% against a 10.06% target, and the asset class was the only one of PSERS’ eight categories to miss benchmarks over 1-, 3-, 5-, 10- and 15-year periods.
PSERS has already reduced its private-equity exposure from $12.2 billion in fiscal 2024 to $10.1 billion by Dec. 31, cutting the allocation to 11.8% from 16.3% through slower commitments and some secondary-market sales.
Pennsylvania taxpayers ultimately bear much of the funding pressure for the system’s 500,000 members, while PSERS argues its benchmark does not fully match a portfolio tilted away from some newer, better-performing vintages.
At least six other state pension systems have also trimmed private equity, reflecting broader doubts that the asset class can repeat the high-teen returns of its past 'golden era' amid tighter credit and higher borrowing costs.