Sunday, March 29, 2015

By the Numbers – Private Equity at NYCERS – 2011 to 2015

Since 2011 NYCERS has dropped the following number of private equity contracts:

  • 2010 – 3
  • 2011 – 4
  • 2012 – 7
  • 2013 – 0
  • 2014 – 8
It is not clear how many of these contracts were standard exits and how many were sold at a loss. NYCERS has provided no cash flow history for these dropped contracts except one. That was Allegra in 2012. That is because I requested the information. You can read about the Allegra disaster in one of my previous postings.

It is reasonable to assume that most of these dropped contracts were equally bad.

Everyone knows that the private equity industry is feeding off of the US public pension fund structure. It is a malignant cancer but no one wants to publicly admit it because that admission would make the public pension funds look like fools and would put most private equity firms out of business.

Now, for the bad news. NYCERS has continued to enter into new private equity contracts since 2010 as you can see from the numbers below:

  • 2010 – 8
  • 2011 – 5
  • 2012 – 7
  • 2013 – 7
  • 2014 – 14
  • 2015 – 3 (as of Sept. 30, 2014)
You would have thought that NYCERS would be quietly trying to get out from under these flawed investment deals but no. There is no end to this stupidity.

NYCERS’s private equity fees for FY-2014 were $44.1M for 142 contracts allegedly worth $4.0B. Don’t bet the ranch on that figure. There is an added charge for private equity organizational costs of $13.9M (page 120). No one knows who this money was paid to except that it has a private equity label.

The sum of the two costs is $58.0M. That is 145 basis points or a 1.45% annual charge. Another serious problem is that NYCERS is not reporting 33 of the 142 contracts in its fee schedule on page 135. Enough said.