With an 18.2% annualized return, the Austin-based Teacher Retirement System of Texas won the No. 1 ranking in returns derived from private equity during the past decade, up from the No. 3 position a year ago, according to an analysis of returns by the Private Equity Growth Capital Council.
The Texas retirement system currently has some $14.4 billion allocated to private equity, putting it in fifth place in terms of assets among public pension funds investing in private equity. Of the top 10 such funds, the 10-year annualized returns generated by public funds’ investments in private equity varied from 14.3% up to the 18.2% attained by the Texas retirement fund.
Private equity has outperformed other asset classes by a significant margin, according to the analysis. Based on the median 10-year annualized returns by public funds for various asset classes, private equity returned 12.3% as compared with 7.9% for public equities, 7.4% for real estate and 5.6% for fixed income. The median total fund return, combining all asset classes, was 7.5%.
According to the Texas Private Equity Report, 21 private equity deals were completed in Texas in October 2014. In terms of dry powder for new deals, the two largest segments that are expected to be funded by private equity allocators are buyouts (46%) and energy (28%), it said.
Recent deals in Texas involving private equity include JP Energy Partners, backed by private equity sponsor ArcLight Capital Partners, which completed an IPO, raising $275 million. In addition, Highmount Exploration and Production was purchased by EnerVest Ltd. through its Fund XIII in September in a leveraged buyout said to be valued at about $805 million.
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