Pension investment in private equity refers to an important component of pension fund investing known as the Endowment Model (also referred to as The Yale Model, credited to David Swensen and Dean Takahashi).
A pension fund may invest directly in private companies, or indirectly via private equity funds. This is a departure of the classic "70-30 Model" where a pension fund would invest 30% of its assets in publicly-listed stock. The perceived benefits of investing in private companies include the improved ability to diversify by region, industry, and sector, in addition to being able to invest in a greater selection of companies (including privately held companies, not listed on a stock exchange). A perceived drawback is the lack of liquidity of such private investments.