Until this year, that is. In January, the Missouri Public School Retirement System said it would invest up to 3% of its portfolio, or $200 million, in venture capital funds located in the state. Like other pension funds, Missouri’s fund is faced with the double whammy of a growing number of retirees and falling equity returns. With the public equity market in a shambles, the pension funds are hoping that by taking a long-term investment outlook they will be rewarded by the historically high returns that come from private equity.
Missouri may be the first, but others already are biting at its heels. Since the start of the year, at least four other institutional investors have announced plans to make first-time commitments to private equity: the state of Illinois, pension funds in Arkansas and Indiana and a pension fund in California’s San Bernardino County (see