Pa pension funds and venture capitalism12/30/2023 ![]() ![]() Meanwhile, valuation and fee terms in contracts between private equity firms and public pensions are kept secret, exempt from open records laws. In a story about an investor receiving two different valuations for the same company, Institutional Investor underscored the absurdity: “Everyone Wants to Know What Private Assets Are Really Worth. In between buying and selling, there are no transparent metrics for valuing the purchased asset – private equity firms can manufacture an alleged value to tell pension investors (and there’s evidence they inflate valuations when seeking new investments). In general, private equity firms use pension money to buy up and restructure companies to then sell them at a higher price than they were purchased. ![]() To comprehend this timebomb, you have to understand private equity’s business model. “Private equity returns get reported on a lag of up to six months, and with each update in 2022 values were coming down – which means 2022 numbers were including overstated private equity asset valuations and 2023 numbers are going to incorporate those losses,” noted the study from the Equable Institute. With more than one in 10 public pension dollars invested in private equity assets – and with states continuing to keep their private equity contracts secret – PitchBook cited a new study finding that losses from the investments may be on the horizon for retirement systems that support millions of teachers, firefighters, first responders and other government employees. Earlier this month, PitchBook – the go-to news outlet of the private equity industry – declared that “private equity returns are a major threat to pension plans’ ability to pay retirees in 2023”. ![]()
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