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Report: Minnesota pensions increasingly reliant on private equity, raising transparency concerns • Minnesota Reformer [1]

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Date: 2025-09 

Minnesota’s major pension funds have upped their private equity investments in recent years in hopes of boosting returns beyond those offered by stocks, bonds or Treasury notes.

Private equity is a broad term referring to investments in private companies — i.e. those that are not publicly traded on the stock market. It’s often the venue of the wealthiest investors like pension funds, university endowments and the most affluent families and has drawn scrutiny for extracting value from companies by loading them up with debt or cutting their quality.

Seventeen percent of the state’s $146 billion pension fund dollars are invested in private equity, according to the State Board of Investment’s most recent report. Minnesota was among the first states to invest its pension funds significantly in private equity, and the State Board of Investment does a good job of negotiating with private equity fund managers to strike deals and negotiate lower fees, according to a report released Monday by Minnesota Center for Fiscal Excellence, a think tank on tax and fiscal policy issues.

But the same report goes on to say the promise of private equity’s higher returns comes with some downsides, including less transparency, higher fees and significant risk.

A spokesperson for the State Board of Investment said the board has not yet reviewed the report, and pointed to the pension funds’ strong performance — returns of more than 10% annually over the past five years.

Minnesota’s investments have come under scrutiny recently; Ryan Leitner of the Private Equity Stakeholder Project wrote a Reformer guest commentary criticizing the board’s consideration of an investment in a firm that owns an Ohio coal power plant. Some pro-Palestine protestors have called on the State Board of Investment to divest from Israel by selling off its investments in Israeli bonds and companies linked to the war in Gaza.

Private equity funds compete with each other for investments, and so are incentivized to keep some details of their operation private. The State Board of Investment, on the other hand, has to abide by the transparency requirements that come with the management of taxpayer money. An increase in transparency by the state could mean the firms no longer want to do business with Minnesota pension funds.

The State Board of Investment recently started disclosing the total amount in private market management fees paid, but doesn’t report those fees on a per-fund basis.

“It’s also not unreasonable to assume that SBI is also concerned that making unfamiliar data and details available to the public can generate the opposite of transparency and understanding — a fertile environment for misinterpretation, confusion, misuse, and erroneous conclusions,” the report reads.

The report concludes with a recommendation that the Legislative Commission on Pensions and Retirement hold public hearings on the topic of transparency in private equity investments.

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[1] Url: https://minnesotareformer.com/briefs/minnesota-pensions-are-increasingly-reliant-on-private-equity/

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