The New York State Teachers’ Retirement System’s private equity program is failing to meet expectations, new board meeting materials show.  

Even as the portfolio returned 12.1 percent over the 12-month period ending on June 30, it failed to meet NYSTRS’s benchmark of 15.4 percent for the same period.  

The lagging performance could be further proof that private equity’s moment as a favorite asset class among institutions could be coming to an end. It certainly isn’t the only evidence: in May, an eVestment survey revealed that 52 percent of investors probed said they believe private equity returns will fall over the next three years.  

NYSTRS has invested $21.4 billion in active commitments and has $8.9 billion in adjusted market value and $6.2 billion in unfunded commitments. The portfolio has returned 15.8 percent over the past three years and 14.8 percent over the past ten years.  

But the benchmark used — the Standard & Poor’s 500 stock index plus 5 percent — has outperformed the portfolio, NYSTRS’s meeting minutes show. Over the past three years, it returned 19.2 percent, and over the past ten, it returned 19.7 percent.  

The private equity portfolio’s largest exposure is to middle and lower middle-market private equity investments, with 48 percent of its portfolio allocated to the asset class, the meeting minutes show. The net internal rate of return for the strategy is 16.1 percent since inception, outperformed only by the pension fund’s allocations to credit and turnaround private equity strategies.   

A spokesperson for NYSTRS did not provide an explanation for the underperformance beyond pointing to the pension fund’s benchmark.  

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The retirement fund has made three new private equity commitments since July, its meeting materials show.  

It committed up to $40 million to SK Capital for its Catalyst Fund I. According to NYSTRS’s meeting materials, SK Capital is a lower-middle-market buyout fund focused on specialty materials, chemicals, and pharmaceuticals. 

NYSTRS also committed up to $100 million to Cortec Group for its seventh fund, the meeting minutes show. The fund’s focus is middle-market leveraged buyouts, according to the minutes.  

The final private equity commitment made by NYSTRS during the quarter was a co-investment to the HarbourVest/NYSTRS Coinvest Fund III, the minutes show. Up to $150 million was approved to invest in a separately managed account and will be used alongside growth equity sponsors in North America, according to the minutes.