Saw a headline this morning on the Chief Investment Officer magazine website that highlighted the fact that West Coast pension plans, including WSIB, Oregon Investment Council, and SFERS were committing another $1 billion to private equity.  I don’t know what total commitments are to the asset class in the last 18-24 months, but it seems like a ton of assets have been earmarked for this space.

As in the past, plan sponsors and their consultants can overwhelm an asset class/strategy by just the sheer size of the commitments.  I’ve recently witnessed several presentations at a number of industry conferences that had the presenter and their firm forecasting the return/risk profile for PE for the next 10-20 years. The expectations are quite rosy, and I have to wonder if they are contemplating the incredible push into this asset class that will likely subdue future returns.

There are likely to be a number of great ideas that are funded through these capital allocations.  But, at what price? When too much money is chasing too few good ideas, the “winner” tends to be the loser longer-term.