Private equity has again outperformed every other asset class in America's public pension portfolios, delivering a median annualized return of 13.2% over the 10-year period ending June 30, 2025, according to the American Investment Council's (AIC) 2026 Pension Trends Report, released this week.
The annual study, which analyzed 200 U.S. public pension funds representing nearly 34 million public-sector workers and retirees, found the asset class ahead of public equities at 10.58%, real estate at 7.77%, and fixed income at 2.40%.
The findings extend what has become a consistent pattern: according to the Washington, D.C.-based AIC, private equity has ranked as the highest-returning asset class in public pension portfolios every year since 2012.
"America's firefighters, police officers, and teachers spend their entire careers serving the public," said Will Dunham, president and CEO of the American Investment Council, in a statement accompanying the report. "Year after year, private equity has consistently been the highest-performing asset class for public pension funds across the country, helping more than 34 million public servants benefit from strong returns and diversified portfolios built for the long term."
Vermont led all pension funds in the study, with the Vermont Pension Investment Commission posting a 10-year annualized private equity return of 16.61%. It was followed by the School Employees Retirement System of Ohio at 16.27%, the Massachusetts Pension Reserves Investment Trust (MassPRIM) at 16.18%, and the West Virginia Investment Management Board at 16.12%.
The Tennessee Consolidated Retirement System, ranked fifth with a 16.04% return, said its private equity program has helped push the fund to a fully funded status exceeding 100%.
"The attractive, long-term returns generated by the TCRS private equity program have contributed to a funded status exceeding 100%, helping to secure the financial future of more than 400,000 active and retired members," said Michael Brakebill, chief investment officer of the Tennessee Consolidated Retirement System, based in Nashville, Tennessee.
Michael G. Trotsky, executive director and chief investment officer of MassPRIM in Boston, Massachusetts, said the 10-year return reflected disciplined portfolio management. "Private equity remains an essential part of a diversified portfolio, and these qualities have helped deliver the long-term returns needed to secure retirement benefits for more than 300,000 current and future retirees in our state," Trotsky said.
The study found that 86% of all public pension funds reviewed invest a portion of their portfolio in private equity. On a dollar-weighted basis, private equity accounts for approximately 13% of total public pension fund assets across the 200 funds studied.
That broad adoption reflects a long-standing conviction among pension chief investment officers that the asset class's illiquidity premium - the additional return investors earn in exchange for locking up capital - justifies its place in a diversified portfolio.
Farouki Majeed, chief investment officer of the School Employees Retirement System of Ohio in Columbus, Ohio, pointed to the asset class's consistency. "Private equity continues to be the highest returning asset class in our portfolio over 10 years and longer periods and thus contributes positively to the long-term sustainability of the pension fund," Majeed said.
Investor sentiment beyond public pensions also remains constructive. A 2026 survey of institutional investors conducted by Preqin found that 88% of respondents planned to increase or maintain their private market investments over the next 12 months, compared with just 12% who said they would reduce allocations, according to the AIC report.
The AIC data arrives at a moment of heightened interest in private markets across retirement plan structures. The U.S. Department of Labor proposed a rule in March 2026 that would establish a formal safe harbor allowing 401(k) plan fiduciaries to include alternative assets including private equity in defined contribution plan investment menus. The proposal is designed to extend to everyday retirement savers some of the diversification benefits that public pension funds have relied on for decades.
The AIC report also surveyed endowments and foundations, where private equity similarly led all asset classes with a median annualized 10-year return of 11.78%, ahead of public equities at 9.77%, real estate at 5.82%, and fixed income at 2.39%. The data suggests that the outperformance is consistent across different types of institutional portfolios, not just public pension systems.
The AIC study measured 10-year returns net of management fees and carried interest for private equity and other illiquid assets, though it noted that return calculation methodologies may vary across pension funds.
The Illinois State Board of Investment, which tied for tenth place in the study with a 15.20% annualized return and manages assets on behalf of approximately 186,000 beneficiaries, said its performance exceeded the national median by more than 200 basis points. "ISBI is proud to once again be one of the nation's top performers for private equity, beating the median return by over 200 basis points," said Dipesh Mehta, chief investment officer at the Illinois State Board of Investment in Chicago, Illinois.
As the debate over broadening private market access within defined contribution plans plays out in Washington, the public pension track record documented in the AIC's 2026 report is likely to figure prominently in both sides of the argument.
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