Pensions and Private Equity – A Letter to the New York Times Editor

The ongoing racket between private equity firms and public pension funds in which they work together to earn billions of dollars in excessive fees at the expense of retirees across the country has been a key theme at Liberty Blitzkrieg this year. My most recent piece on the topic was published last week and titled, Another Pension Scandal – The Crony Love Affair Between North Carolina, Credit Suisse and Erskine Bowles.

Here’s an excerpt:

When it comes to how the U.S. economy of fraud functions in 2014, the following article has it all. A government official, a global investment bank and a businessman/politician, all working together to enrich themselves at the public’s expense. It demonstrates how big bucks are really earned by insiders in the new American Dream, characterized by extreme cronyism and corruption.

This article zeros in on what’s known as “placement agents,” which are often large financial firms with connections across the political spectrum, and are often money managers themselves, such as private equity giant Blackstone. However, they don’t need to have any expertise in financial matters, they simply need to be connected. As such, placement agents are sometime even former NFL stars.

Incredibly, many of these public pension managers claim that they need to sign secret agreements with private equity firms or they won’t have access to their investment strategies (such as underperformance and high fees I suppose). Today a reader pointed out a letter that someone sent to the New York Times editor, which perfectly described the ridiculousness of this excuse. Here’s what he said:

It is absurd that, as Gretchen Morgenson reports in “Behind Private Equity’s Curtain” (Oct. 19), huge pension funds like the California Public Employees’ Retirement System, or Calpers, refuse to demand transparency from private equity firms for fear that the firms will stop doing business with them. Calpers is the largest pension fund in the country, with $300 billion in assets. Wall Street boycotting Calpers would be like popcorn vendors boycotting movie theaters.

Well said sir.

Read the entire letter here.

For more recent articles on the shady private equity/public pension scheme, read:

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

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

In Liberty,
Michael Krieger

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