Private Equity Flops Leave Investors Vulnerable to Selloff (1)

The slump in private equity returns in recent years has pushed US pensions and endowments to lean on an old and familiar investment: Stocks.

Large public pension funds including California Public Employees’ Retirement System, Alaska Permanent Fund, and Teacher Retirement System of Texas, and endowments at Ivy League schools such as Columbia University, have become heavily reliant on public market investments to both bolster performance and free up cash.

Chief investment officers know they’ve been playing for time, leaning on stocks until private equity starts to pay out again. It worked for the fiscal year that ...