25 March 2023

Took Them Long Enough

Given the record of self-dealing, opaque investments, Byzantine contracts, and insanely high fees, an increasing number of public pension funds are backing off from their arrangements with private equity firms.

Some U.S. public pension and investment funds are pulling back on private equity after a decade of state and local retirement systems aggressively pursuing the expensive, risky and hard-to-trade asset class.

Maryland’s $65 billion retirement system is investing less new money in private equity. At Alaska’s $77 billion state fund, the investment chief wants to cancel a planned ramp-up. And the $615 million pension fund of Mendocino County, Calif., last month opted against introducing private equity to its investment mix. 


Over the past decade, state and local officials committed more money to private-equity managers. Those managers offered supercharged returns on portfolios of private companies that they bought, overhauled and then sold. But public funds had to lock up their money, often for more than a decade, with limited visibility and limited options in the case of losses.


U.S. pension and investment funds are part of a larger wave of institutional investors pulling back on private equity.

Even if PE firms generated the returns that they promise, the fees (and other gotchas) that they charge make their returns positively pedestrian.

I am not sure how PE managed to create the illusion that they had some sort of special sauce to the pension funds when there is none, I'm thinking various forms of bribery, both legal and illegal, figure prominently.


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