Public pensions bleed $17 billion in fees

Private equity deal-makers have milked the nation’s ten largest public pension funds of more than $17 billion in fees since 2000, an analysis conducted for the New York Times has revealed.

The big public funds have almost never realized the 20% to 30% returns the private equity people promised. Today many of these funds are struggling to recover from a collapse in the value of their portfolios. State and local pension assets declined by 27.6% from the end of 2007 to the end of 2008, according to the Government Accountability Office.

One study showed that private equity funds underperformed the Standard & Poor’s 500-stock index by 3% annually from 1980 to 2003, after accounting for the payment of fees.

In November, 2007, the Washington State Investment Board increased its investment in private equity to 25%. The state’s $75 billion fund is among the most heavily invested in such funds.

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