CalPERS Failed Investment in a Private Equity Firm: Naked Capitalism Explains It All
Yesterday, Naked Capitalism posted a detailed piece explaining just how CalPERS was outmaneuvered by Silver Lake, a PE firm, and then failed to accurately account for its loss when the investment went bad. I suspect that the average reader will get somewhat lost in the large number of technical components contained in Naked Capitalism’s post. However, their work is must-reading for pension trustees, pension staff, legislators, and regulators because Yves Smith shows that even the largest public pension plan in the United States is ill-equipped to make sophisticated investments, ill-prepared to account for those investments, and unwilling to recognize its mistakes.
About four years ago, I tried to explain why Florida SBA should not acquire a stake in the private equity manager, Providence Equity Partners, a private equity firm. I don’t know what happened to that investment. At the time, however, I pointed out that it was a very bad idea for public pensions to acquire ownership-stakes in their money managers. Naked Capitalism has done the hard work of proving my case.