Pensions: Private Equity Has Led U.S. Pension Fund Performance for the Past 14 Years

For the fourteenth consecutive year, private equity has ranked first among the best-performing asset classes in U.S. public pension funds. According to the report Pension Trends 2026 by the American Investment Council, published a few days ago, private equity generated a median annualized return of 13.2% over the ten-year period ending June 30, 2025, compared with 10.58% for publicly traded stocks, 7.77% for real estate, and 2.40% for bonds.

The study covers 200 U.S. public pension funds, representing nearly 34 million public employees and retirees.

Private Equity: A Cornerstone of U.S. Institutional Asset Allocations

In the United States, public pension funds have gradually made private equity a structural component of their portfolios. According to the AIC, 86% of the funds surveyed invest in this asset class, which accounts for nearly 13% of their assets under management on a weighted average basis.

This allocation is based on a long-term approach. Pension funds must finance obligations that span several decades. They therefore have an investment horizon that allows them to tie up a portion of their capital and seek additional returns in exchange for this lack of liquidity.

However, performance varies significantly from one fund to another. The Vermont Pension Investment Commission tops the rankings with a 10-year annualized return of 16.61 percent, followed by the Ohio School Employees Retirement System (16.27 percent) and the Massachusetts Pension Reserves Investment Trust (16.18 percent).

These results also highlight the importance of manager selection and portfolio construction. In private equity, performance differences between funds can be significant, depending on the strategies employed, investment Vintage , and the teams’ ability to support the growth of the companies.

Returns to Support Pension Funding

Beyond financial performance, the study highlights the contribution of private equity to the stability of U.S. pension plans.

The Tennessee Consolidated Retirement System, which has posted an annualized return of 16.04% over the past ten years in private equity, reports that these investments have helped raise its coverage ratio above 100 percent. The fund thus holds assets whose value exceeds that of its valued pension liabilities.

“The attractive long-term returns generated by our private equity program have helped raise our funding ratio above 100 percent, thereby helping to secure the financial future of more than 400,000 members, both active and retired,” explains Michael Brakebill, the fund’s chief investment officer.

This approach extends beyond the realm of pensions alone. The AIC has also studied the performance of U.S. endowments and foundations. Private equity once again came out on top, with a median annualized return of 11.78% over ten years, ahead of publicly traded stocks (9.77%), real estate (5.82%), and bonds (2.39%).

Is Private Equity Set to Play a Greater Role in Individuals’ Retirement Savings?

The role of private equity in institutional portfolios is now fueling discussions about its accessibility to U.S. investors.

In March 2026, the U.S. Department of Labor proposed a new regulatory framework designed to facilitate the inclusion of alternative assets, including private equity, in 401(k) retirement savings plans, which are widely used by U.S. employees.

The goal is to give individual investors access to diversification strategies that have historically been reserved for large institutional investors.

This development mirrors the changes underway in Europe, particularly with the ELTIF 2.0 regulation, which facilitates private investors' access to unlisted assets.

For wealth management advisors, private bankers, and family offices, the U.S. experience offers insights into building long-term asset allocations. The question concerns both the portion of a portfolio to allocate to private equity and how to build that exposure over time.

The investment horizon, liquidity needs, and diversification across managers, strategies, and as Vintage —all of these are key factors. The historical performance of U.S. pension funds illustrates not only the potential of private equity but also the importance of rigorous selection and an allocation tailored to each investor’s constraints.

After several decades of being included in institutional portfolios, private equity continues to open up to private investors.

Source: American Investment Council, Pension Trends Report 2026, data as of June 30, 2025. The returns presented are historical, calculated according to the methodologies of the institutions studied, and are not indicative of future performance. Returns on illiquid assets are presented net of management fees and performance fees, subject to the methodological differences noted by the AIC.

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