US pension funds brace for bleak results from private equity investments

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New York, Sep 24 (IANS) Public pension funds are already reporting big losses in 2022. Things are likely to get worse, according to media reports.

Indeed, the funds, which manage about $5 trillion in retirement savings for U.S. teachers, firefighters and other public servants, have yet to factor in returns from private equity and other illiquid investments in second quarter, the Wall Street Journal reported.

“You should expect over the next three or four quarters to see write-downs in the illiquid part of the portfolio,” Allan Emkin, consultant to large pension funds at Meketa Investment Group, told the California State Board of Trustees. Teachers, worth $300 billion. ‘ Retirement system last month, according to the report.

The losses are another example of how the current market turmoil offers almost no place to hide, and even investments usually thought of as safe havens are collapsing.

Friday closed at its lowest level of 2022, weighed down by worries about inflation, weak global growth and whether the Federal Reserve’s rate hike campaign will tip the United States into a recession.

Public pensions have been facing a funding crisis for years. Many have increasingly turned to private equity and other non-traditional investments in recent years in hopes of filling their gaps.

Public pensions reported a median minus 7.9% for the year ended June 30, their worst losses since 2009, according to data from comparison service Wilshire Trust Universe, The Wall Street Journal reported.

But the only performance numbers from the brutal second quarter of this year reflected in that 7.9% figure are for traditional publicly traded investments like stocks and bonds. The private market returns incorporated into this figure are for the 12 months ended March 31 and include double-digit private equity gains for the second quarter of 2021.

In the weeks and months ahead, public pension funds will calculate the second quarter performance of their assets in the private market based on estimates they receive from investment managers. Warning signs are already visible in the secondary market, where investors can buy and sell private equity assets midway through an investment’s lifespan, The Wall Street Journal reported.

–IANS

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