Milwaukee Pension CIO “Troubled by Lack of Transparency” In Private Equity Industry, Calls for Change


David M. Silber, the chief investment officer of the City of Milwaukee Employees’ Retirement System, penned an editorial over at P&I this week calling for better transparency in the private equity industry.

The editorial is notable because it’s rare to see a pension investment professional take such a loud and public stance on private equity transparency.

Silber does note that his criticism has little to do with the asset class’ performance, but rather the secrecy surrounding subscription documents, fees and expenses.

The whole piece is worth reading, but here’s an excerpt:

The City of Milwaukee Employes’ Retirement System believes it is in the best interest of everyone involved in the private equity industry for private equity managers to stop claiming that fees, expenses, internal controls and subscription documents are confidential information.


While CMERS trustees believe that private equity investments are an important part of a diversified portfolio, CMERS is troubled by the lack of transparency that private equity managers offer investors on issues including fees, internal controls and subscription documents. The stated fees on private equity vehicles are lucrative to begin with, but the unstated fees managers earn in the form of transaction, consulting, monitoring and other fees are far more concerning…

CMERS leadership is skeptical of private equity managers’ insistence that fee structures, internal controls and subscription documents, particularly limited partnership agreements and side letters, are confidential information that provides a given manager a competitive advantage. Another way of saying this is that CMERS officials have never heard a manager attribute its top-quartile returns to its fee schedule, allocation of expenses, internal controls or obfuscating legal documents. What should differentiate one private equity manager from another are qualities including, but certainly not limited to, experience, relationships, skill, resources and alignment of incentives and interests.


CMERS challenges the private equity industry to acknowledge that much of what is claimed to be confidential:

* does not provide a competitive advantage and

* should be made public through increased transparency with investors going forward…

Read the full piece here.


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