CalPERS, California's $ 360 billion state pension fund, has announced plans to increase investment in private equity. It's not hard to see why. Despite the high fees charged by private equity funds, CALPER says the spinoffs are huge. Its private equity portfolio generated a return of 16.1% in 2017, compared to only 11.5% for its equity portfolio, and an annual return of 10.5% over the past two decades.
Over the last 20 years, private equity has gained importance as an asset class, and part of the once small market has become an important part of the economy. But there is no free meal in finance and the rise of private equity is likely to pose risks for the economy and for taxpayers who will have to fill the gaps in public pension funds if their investments are not profitable.