How Private Equity Helps Us Secure Public Employee Retirement

At Colorado PERA, we invest for one purpose: To provide a secure and reliable retirement for the people who spend their careers serving our state. We do that by managing a diversified investment portfolio that includes everything from traditional stocks and bonds to investments in real estate and private equity.

Private equity is often less well-understood by individual investors than other types of investments and is an important component of institutional portfolios. Here’s why we invest in this asset class and how it contributes to our members’ hard-earned retirements.

What is private equity?

Simply put, private equity generally refers to investments made in companies that aren’t traded on the public stock exchanges. Those investments can include:

• Venture capital: Providing money to young businesses like startups.
• Growth capital: Investing in more mature businesses looking to grow or expand.
• Buyouts: Purchasing a company or a portion of a company with the goal of growing its value.

We invest in private equity through carefully selected limited partnerships and funds that are managed by experienced professionals. Those funds cover a variety of business areas with high potential for growth, such as technology, energy, and health care.

Why PERA invests in private equity

The PERA Board of Trustees, which oversees PERA’s investments, believes a well-diversified portfolio is key to making sure we can deliver on our promises to members. Our investments in private equity are an important part of that strategy, despite being a relatively small portion of the portfolio. As of June, private equity amounted to 7.5% of the total PERA portfolio with a long-term target of 10%.

We first started investing in private equity in the early 1980s, and those investments have paid off in the years since. In the past decade, for example, private equity has earned an annualized return of 11.5% compared to the total fund’s 8.6% return.

That strong performance helps strengthen the trust funds and ensures we can continue paying benefits well into the future.

Private equity and transparency

Because private companies aren’t publicly listed, financial details on those companies aren’t always available to the public. State law also limits what we can disclose.

Still, we are committed to being as open as possible. You can view a list of our private equity investments on our website, including how much money we’ve committed and each fund’s internal rate of return. We also were an early supporter of the Institutional Limited Partner Association (ILPA), which aims to improve reporting and transparency within the private equity field.

Our team of investment professionals reports regularly to the Board of Trustees, which has a fiduciary duty to act in the best interests of members and retirees. That includes making sure our private equity investments meet our standards for risk-adjusted returns.

Want to learn more?

We produce our Investment Stewardship Report every year to provide more insight into how we manage investments on behalf of our more than 700,000 members and retirees. You can explore a digital interactive summary at copera.org/stewardship-snapshot.

Private equity may be a small portion of our investment portfolio but it’s an important part of the long-term strategy that helps secure our members’ retirements. By investing wisely in both public and private markets, we’re making sure the trust funds remain strong not just for today’s members and retirees, but for generations to come.

Learn more by watching our video, “Investing in Your Future: How PERA Grows Member Benefits.”