Leo Kolivakis runs the blog Pension Pulse, which tightly covers the world of pensions and investments.
Kolivakis recently commented on Gretchen Morgenson’s New York Times story, “Behind Private Equity’s Curtain”. Here’s what he had to say:
There is still way too much secrecy in the private equity industry, and much of this is deliberate so that PE kingpins can profit off…public pension funds that hand over billions without demanding more transparency and lower fees. This is why I played on the title and called it an “iron curtain.”
Go back to read my comment on the dark side of private equity where I discussed some of these issues. I’m not against private equity but think it’s high time that these guys realize who their big clients are — public pension funds! That means they should provide full transparency on fees, clawbacks and other terms. They can do so with a sufficient lag as to not hurt their “trade secrets” but there has to be laws passed that require them to do so.
And what about the Institutional Limited Partners Association (ILPA)? This organization is made up of the leading private equity investors and it has stayed mum on all these transparency issues. If they got together and demanded more transparency, I guarantee you all the big PE funds would bend over backwards to provide them with the information they require.
Interestingly, all the major private equity funds have publicly listed stocks, many of which have sold off recently during the market rout (and some offer very juicy dividends!). Go check out the charts and dividends of Apollo Global Management (APO), Blackstone (BX), Carlyle Group (CG), and Kohlberg Kravis Roberts & Co. (KKR).
On its Q3 conference call, Blackstone’s management pointed out that during the past four years, its growth had been limited only by how much capital it can manage efficiently, not by how much capital investors have been willing to provide.
But as valuations keep inflating, it will be even more difficult for these alternative investment managers to find deals that are priced reasonably. And if deflation settles in, I foresee very difficult days ahead for all asset managers, including alternative investment managers.
Read the entire post here.