Growing Private Equity Problems: NYCERS and Yucaipa

I have previously commented on serious problems with NYCERS private equity investments.

On March 23, 2013, on the front page of the NY Times business section, there was an article about Yucaipa and the NYC pension funds. Yucaipa is a private equity firm which has been doing business with NYCERS since 2004.

I remember the 2004 board meeting where NYCERS decided to hire Yucaipa. The meeting was about to end when the DC-37 representative raised his hand and presented a resolution to allocate money the a firm named Yucaipa. The resolution was seconded and adopted. The meeting then closed. There usually is a certain amount of discussion when committing money to an investment manager. I leaned over to the chair and asked what had just happened and her response was "Don't ask.".

I thought you might be a interested in the asset/fee history of Yucaipa at NYCERS lsited in the chart below. Of course, you need remember that the annual asset values are only guess from Yucaipa. In addition, NYCERS has no control over the payment of the fees and is only reporting numbers that some other entity gave them. But on their face these numbers are depressing.

In 2006, Horatio Sparkes,the Comptroller's representative went to work for Yucaipa. In 2004 the Comptoller's Office negotiated and signed the NYCERS contract with Yucaipa.

Here is another wrinkle in the Yucaipa story.

Yucaipa's History with NYCERS: (2004 - 2012)

	Yucaipa American Fund 1		Yucaipa American Fund 2		Yucaipa Corp Initiative II
Year	Assets	Fees	Assets	Fees	Assets	Fees
2004	$0	$777.105	na	na	na	na
2005	$38.95M	$961,943	na	na	na	na
2006	$71.56M	$1,802,694	na	na	na	na
2007	$66.52M	$1,515,547	na	na	na	na
2008	$64.79M	$583,494	$29.37M	nr	$4.71M	nr
2009	$51.94M	$34,764	$41.09M	$1,552,397	$4.36M	$820,536
2010	$56.53M	$580,399	$84.75M	$2,220,000	$11.65M	$826,086
2011	$60.73M	$869,949	$104.85M	$1,549,912	$9.07M	$658,907
2012	$63.19M	$637,938	$163.04M	$423,574	$24.46M	$624,375

Who's Helping Who?

September 26, 2011 - NY Times:

Amalgamated Bank (the nation's only union-owned bank) announced on Sunday that WL Ross & Company (Wilbur L. Ross) and the Yucaipa Companies (Ronald W. Burkle) would each invest $50M in the bank. The two firms will each receive 20% of the bank's common shares. Previously the FDIC ordered the bank to raise its capital ratio to 7% which had slipped to 6.2%.

NYCERS has $3.9B invested in an S&P 500 index fund managed by the Amalgamated Bank. It also has reportedly $163.02M invested in three private equity partnerships run by the Yucaipa Companies. It is not clear exactly how much NYCERS has in the Yucaipa partnerships because no one knows for sure how much NYCERS has invested in any of its private equity partnerships.