Saturday, April 16, 2016

CalPERS Failed Investment in a Private Equity Firm: Naked Capitalism Explains It All

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.[1]  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.[2]  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.


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