Public Funds Can Still Compete
Source: Aon Hewitt Retirement & Investment

Key Points

In past findings, public funds struggled to outperform endowments and foundations (E&Fs), as reported in our paper titled “Can Public Funds Compete?” dated Winter 2003/20041.

In a study conducted in 2011, we confirmed that public funds can compete with returns above E&Fs2.

An update on this study through 2016 concluded that public funds have continued to outperform E&Fs on average by 100 basis points over the last five years ending December 31, 2016.

Public funds had larger allocations to public equities—namely U.S. equities versus E&Fs, which has contributed to outperformance.

Public funds’ preference for private equity versus hedge fund exposure helped boost relative returns.

Public funds typically have a cost advantage given their size (economies of scale).

Past Studies

Our original 2003 research1 indicated that public funds underperformed E&Fs. In an update with data through 20112, a reversal occurred where public funds outperformed E&Fs, as shown below. We compared public funds to E&Fs given that, while they are very different in many areas, they are very similar in their total return approach to investing.


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