The California Public Employees’ Retirement System insists that it’s not firing all of its hedge funds because they aren’t worth the 2%, let alone the 20%. But its fellow pension funds, none of whom are CalPERS in terms of size or in-house capabilities, noticed a very clear nod-and-wink in their direction. And so, having followed the herd into alternatives, they’re now forming a new herd to abandon them. Read more »
Hedge funds might be feeling pretty down in the dumps about CalPERS’ decision to break it off with them. OK, so probably not, but the point is that CalPERS is afraid it might have hurt their feelings, and it’s been beating itself up about it. You see, hedge funds, it’s not you, it’s CalPERS. Sure, it’s an old cliché but it’s true! You’re great. It’s just that CalPERS has had some new experiences and just needs to make a change. You know how it goes. Read more »
The giant pension fund’s corporate governance honcho, Anne Simpson doesn’t like Carl Icahn’s jerk-off plans. She doesn’t like his jerk-off Twitter account. And she doesn’t like him, jerk off. Uncle Carl had better keep his goldbrickin’ ass out of her beach community state. Read more »
SEC enforcement orders against low-grade investment hucksters are among my favorite literary genres, full of oddball characters, devious drama, and silly names for hedge funds. Part of me wants the SEC to just issue fake enforcement orders when they don’t have any real cases – no one would know the difference, and I would read them all1 – but I guess you can’t, as they say, make this stuff up.
Today there is Umesh Tandon, “the CEO of Chicago-based investment advisory firm Simran Capital Management,” who, remembering the old adage that it takes money to make money, told CalPERS that he was a big-shot hedge fund manager when he was in fact a small-shot hedge fund manager. In hindsight this should have been obvious because, I mean, just look at what he named his hedge funds:
Simran served as a subadviser to funds managed by other advisers and provided advisory services to its own private onshore fund (Simran Pre-Event Driven Activist Opportunity Fund LP) and a private offshore fund (Simran Pre-Event Driven Activist Opportunity Fund Ltd), both of which fed into a master fund.
“Pre-Event Driven Activist Opportunity Fund” is my new favorite fraudulent hedge fund name. Surely “pre-event driven” should mean “we trade on inside information,” though realistically it means “we have no idea what we’re talking about.” Also amazingly the fund did, or supposedly did, something totally unrelated to events, activism, opportunity, whatever: “Tandon marketed Simran as an experienced fixed income manager that applied a unique risk-averse strategy bearing a low correlation to equity and debt markets.” Perhaps the unique strategy was fraud.
Though, considering that name, Tandon’s fraud was surprisingly mild: Read more »
What is CalPERS’s job? There’s actually an answer: it’s to “Provide responsible and efficient stewardship of the System to deliver promised retirement and health benefits, while promoting wellness and retirement security for members and beneficiaries.” I suppose “the System” is defined somewhere, and blah blah blah health benefits and wellness and beneficiaries, but I prefer to stop at the capitalized abstraction: CalPERS provides responsible and efficient stewardship of the System.
“Responsible” and “efficient” can conflict, though:
The second-largest pension fund in the United States is considering a move to an all-passive portfolio while at the same time, the largest brokerage firms are falling over themselves to push passively managed exchange-traded funds. The California Public Employees’ Retirement System’s investment committee started a review of its investment beliefs last week, with the main focus on its active managers ….
CalPERS oversees about $255 billion in assets, more than half of which already is invested in passive strategies. … “CalPERS investment consultant Allan Emkin told the investment committee that at any given time, around a quarter of external managers will be outperforming their benchmarks, but he said the question is whether those managers that are doing well are canceled out by other managers that are underperforming.”
So: financial markets exist to allocate capital to its most productive uses.1 One use of capital that may not be all that productive is allocating capital, so it’s understandable that rich sophisticated capital-allocators like CalPERS would allocate less capital to the business of allocating capital. Why spend so much money on external active manager fees when they turn out not to be that good at active management? Just index, right? Read more »
I’m just some guy, but two entities of which I have become aware in my travels are (1) Apollo Global Management and (2) CalPERS. I don’t want to endorse 100% of what either of them does – CalPERS tend to be governance-scoldy, and I’ve seen with my own eyes the withered husks of formerly personable M&A lawyers who’ve spent too much time on Apollo due diligence – but I don’t think it’d be too controversial for me to say that they’re both acknowledged leaders in their fields, those fields being respectively (1) running private equity funds and (2) investing great gobs of pension money in, among other things, private equity funds. To the point that, (1) if Apollo came to me and asked “who should we ask to invest in our new private equity fund?,” CalPERS would probably be high on my list, and (2) if CalPERS came to me and asked “what private equity funds should we invest in?,” Apollo would probably be high on that list.
So where is my $20 million?
Today former CalPERS CEO Federico Buenrostro and former independent placement agent Alfred Villalobos were indicted for fraudulently funneling $20 million of placement-agent fees from Apollo to Villalobos. The case is bonkers for reasons well summed up by Dan Primack a year ago when the SEC brought a related civil case. The gist of it seems to be: Read more »