U.S. Pension Executives Ink Letters Concerning PE Alignment Issues

marina_public_pensionsIn general, U.S. public pension funds more than sovereign wealth funds need private equity to help reach their annual target returns. This give-take relationship manifests across America, even when partner alignment issues arise. What has taken center stage is when private equity firms take monitor fees and transaction fees on failing portfolio companies.

The debt binge left a nasty hangover for many pre-2007 private equity funds. Side effects include poor fund performance, languishing portfolio companies and unemployed workers. Emboldened asset owners – some of the larger U.S. pensions are under fire from their support base, public sector unions, in what seems to be private equity firms making money from fees other than turning around actual portfolio companies.

Oregon Public Employees’ Retirement Fund – History with TPG Capital

Vintage Year Fund Name Capital Commitment (Millions USD) Total Value Multiple
1994 TPG Partners I 50 3.66x
1997 TPG Partners II 300 1.77x
2000 TPG Partners III 300 2.47x
2003 TPG Partners IV 300 1.9x
2006 TPG Partners V 300 0.97x
2008 TPG Partners VI 750 1.22x
2008 Apollo Investment Fund VII 400 1.76x

Date: March 31, 2013, Oregon Public Employees’ Retirement Fund

Take for example, Caesars Entertainment Corporation, which TPG Capital LP and Apollo Global Management LLC took private with investor money, mostly public funds. The casino operator became saddled with debt affecting the financial health of the balance sheet. Coupled with top-line revenue shortfalls due to losses in gambling revenues, their investment faltered.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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