Quote of the Day from K.K.R. – Wall Street Officially Becomes a Parody of Itself

Screen Shot 2014-10-20 at 2.18.48 PMLongtime readers of Liberty Blitzkrieg will know that I think the greatest parody of Wall Street ever created is courtesy of SNL about a made-up firm called Global Century Investments. Before I provide a link to the video, I want to highlight a stunning quote from Gretchen Morgenson’s excellent New York Times article detailing the extraordinarily shady relationships between private equity firms and public pension funds. The quote comes in at the end of the article:

Kristi Huller, a spokeswoman for K.K.R., initially denied that it could reduce or eliminate its fiduciary duties. But after being presented with an excerpt from the agreement, she acknowledged that its language allowed “a modification of our fiduciary duties.”

What K.R.R. spokeswoman Kristi Huller does is straight up lie about the firm’s fiduciary duties, only to backtrack once she realizes she has been caught.

That is exactly what happens at the end of the SNL spoof. Yes it’s official, Wall Street has become a literal parody of itself.

Watch the video here and compare it to the quote above. Remarkable.

With that being said, you really must read the New York Times article. It is striking in its revelations of unabashed financial shadiness, and it’s simply impossible to not conclude that public pensions and private equity firms are actively and intentionally working against the public.

Here are a few excerpts:

The California Public Employees’ Retirement System, known as Calpers, is the nation’s largest pension fund, with $300 billion in assets. In a statement, Calpers said it “accepts the confidentiality requirements of limited partnership agreements to facilitate investments with private equity general partners, who otherwise may not be willing to do business with Calpers.”

But critics say that without full disclosure, it’s impossible to know the true costs and risks of the investments.

“Hundreds of billions of public pension dollars have essentially been moved into secrecy accounts,” said Edward A.H. Siedle, a former lawyer for the Securities and Exchange Commission who, through his Benchmark Financial Services firm in Ocean Ridge, Fla., investigates money managers. “These documents are basically legal boilerplate, but it’s very damning legal boilerplate that sums up the fact that they are the highest-risk, highest-fee products ever devised by Wall Street.”

Retirees whose pension funds invest in private equity funds are being harmed by this secrecy, Mr. Siedle said. By keeping these agreements under wraps, pensioners cannot know some important facts — for example, that a private equity firm may not always operate as a fiduciary on their behalf. Also hidden is the full panoply of fees that investors are actually paying as well as the terms dictating how much they are to receive after a fund closes down.

A full airing of private equity agreements and their effects on pensioners is past due, some state officials contend. The urgency increased this year, these officials say, after the S.E.C. began speaking out about improper practices and fees it had uncovered at many private equity firms.

This revelation of private equity firms (and hedge funds) ripping off public pension retirees has been a key theme on this site in 2014. Here are a few posts on the subject:

Consultant the San Francisco Pension Fund Asked Whether it Should invest in Hedge Funds, Runs a Hedge Fund

New Jersey’s Debt is Downgraded by Fitch as Chris Christie Funnels Pension Money to Private Equity and Hedge Funds

Meet Janet Cowell – The North Carolina Treasurer Desperately Pushing to Keep Criminal Public Pension Fees Secret

Leaked Documents Show How Blackstone Fleeces Taxpayers via Public Pension Funds

In Liberty,
Michael Krieger


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