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Is Uncle Sam The Biggest Enabler Of Private Equity Jobs "Offshoring"?


Skeptical Optimist
DP Veteran
Aug 25, 2006
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Very Conservative
Is Uncle Sam The Biggest Enabler Of Private Equity Jobs "Offshoring"? | ZeroHedge

Lately, it has become particularly fashionable to bash private equity, especially among those workers in the employ of the state. The argument, in as much as capitalism can be summarized in one sentence, is that PE firms issue excess leverage, making bankruptcy inevitable (apparently those who buy the debt are unaware they will never get their money back), all the while cutting headcount to maximize cash flow (apparently the same PE firms don't realize that their investment will have the greatest terminal value to buyer if it has the highest possible growth potential, which means revenue and cashflow, which means proper CapEx investment, which means streamlined income statement, which means more efficient workers generating more profits, not less). The narrative ultimately culminates with some variation on a the theme that PE firms are responsible for offshoring jobs. While any of the above may be debated, and usually is especially by those who have absolutely no understanding of finance, one thing is certain: when it comes to bashing PE, America's public workers should be the last to have anything negative to say about Private Equity, and the capital markets in general. Why? Because when it comes to fulfilling those promises of a comfortable retirement with pensions and benefits paying out in perpetuity, always indexed for inflation, and otherwise fulfilling impossible dreams, who do America's public pension fund administrators go to? The very same private equity firms that have suddenly become outcast number 1.

Here is the New York State Common Retirement Fund, which "holds assets in trust for more than one million employees and retirees from State governments, most local governments and some public authorities." The fund manages $150.6 billion as of March 31, 2012; it is the third largest pension plan in the US, with its California cousin: Calpers, the biggest. Some facts about the pension fund:

Member Information:
· Overall membership in NYSLRS: 1,059,398
o 656,224 members (active or vested)
o 403,174 retirees and beneficiaries
o 95% are members of ERS; 5% are members of PFRS
Average Pensions:
· Average pension for all ERS retirees in FY 2012: $20,241
· Average pension for all PFRS retirees in FY 2012: $42,259
Employer Contribution Rates:
· FY 2014 average contribution rates: 20.9 percent of payroll for ERS; 28.9 percent of payroll for PFRS.
· Employers contributed roughly $4.59 billion to the Retirement System in FY 2012.
· Employees contributed $273.2 million in FY 2012.
· Employer and employee contributions have helped the Fund remain well funded.

In other words, it is the fund's obligation to allocate cash to places where it will generate the highest returns. So where does the NY Retirement fund go to make sure the money of its public workers is best managed? This is where: thousands and thousands of private equity firms (from the source, in reverse chronological order):


The list above includes only the private equity firms that the NY pension fund has invested cash in. It excludes the capital allocations to hedge funds (we will release that list once the hedge fund bashing begins) and other alternative asset managers: that list is also just as massive. Furthermore, the list is also only for one pension fund: we leave it to the more inquisitive readers to conduct the same analysis for other US pension funds. Going further back will certainly reveal many more names, among them, with virtual certainy, a rather infamous company known as Bain Capital.

For those who are still confused what the above list means, here is the summary: bash Private Equity all you want, but ask this: who is the biggest enabler of private equity's infamous "offshoring" - answer: Uncle Sam, whose desperate need to allocate cash for most efficient management of welfare resources, just happens to be one of the biggest (if not the biggest) source of "Equity" in Private Equity. Because without private equity, America's millions of civil servants would have little hopes of generating the kinds of pension, retirement and healthcare returns for the rest of their lives they have grown accustomed to expect.


Sep 26, 2012
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North Carolina
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Very Liberal
Right on. The pension fund investors should have known that the investment bankers were selling bonds backed by worthless mortgages. They should have known that the same investment bankers were betting big time against those same bonds they sold via insurance policies known as CDSs (lots and lots of CDSs too). They should have known that the issuers of this junk were the ones paying the rating agencies and the AAA ratings meant nothing. Not only the pension fund managers but large investors, including banks world wide, made the same mistake. Now I suppose the pension fund managers are whining because they were not bailed out as were the investment banks that caused the schamozzle. First things first.
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