Public pension fund assets are invested in diversified portfolios that include public equities; bonds issued by the U.S. and foreign governments and corporations; real estate; alternatives, such as private equities, hedge funds, and infrastructure; and other asset classes. Over time, earnings on investments constitute the largest portion of public pension fund revenues, which also include contributions from employers and employees.
Public pension asset allocations typically are developed as part of a process that considers the plan’s liability stream, or projected benefit payments, expected revenue from contributions, and investment earnings.
Based on the latest information from the Public Fund Survey, the average public pension fund asset allocation is as follows:
- Public equities: 47.6%
- Fixed income: 23.2%
- Real estate: 6.6%
- Alternative investments: 18.3%
- Cash & Other: 4.3%