Interim: 5 Points to Know: Pensions. Private Equity Firms. Transparency in Fees.

• Pension systems have failed to disclose, or ask, how much private equity firms keep in performance fees
• When performance fees paid by pensions is revealed, the rulemaking/agency protocol/legislative solutions are 3 fold:
  • tougher scrutiny of private-equity investments
  • cut back a pension’s private equity holdings
  • negotiate lower fees
• Examples of performance fees paid around the country by state pension systems:
  • CALPERS Billions over 17 years above what was disclosed
  • New Mexico $6.3 million in performance fees
  • South Carolina $35.3million in performance fees
  • Kentucky $34.1 million
  • New Jersey $91.3 Million in performance fees
• Pension funds avoid disclosing performance fees because:
  • accounting rules didn’t require public reporting
  • returns were high enough to mitigate any cost concerns
• The issue of performance fees paid came to light nationwide after an activist blog publicly asked a CALPERS official for the amount the pension system paid to private equity firms
  • When CALPERS investigated, it was determined that the private equity firms did not know th e answer.

Bonjour, House Pension Committee Interim Charge #5

Wall Street Journal | Pensions’ Private-Equity Mystery: The Full Cost

New York Times | Calpers Paid $3.4 Billion to Private Equity Firms