In a much-anticipated disclosure, the California Public Employees’ Retirement System said it paid $3.4 billion in performance fees to its private equity managers since 1990 while the controversial sector generated $24.2 billion in profits for retirees.
The nation's largest public pension system said the portfolio's profit-generating performance justifies the sector's risks and complexity.
"Private equity has the highest net returns in our portfolio," said Ted Eliopoulos, CalPERS' chief investment officer. "As a long-term investor, it is an important piece of our investment strategy and our mission to provide pension benefits for generations to come."
Jim Paris Comments -
Despite being considered one of the most insolvent pension systems in the country, they still have the money to pay out billions in bonuses. Granted, these bonuses are based on investment performance, but that has issue of its own. Many argue (and I would agree) that this may be placing the fund at a higher risk as fund managers can ostensibly go to the casino with other people's money. In any case, this pension system is an absolute mess and reality will start setting in in the next 3 to 5 years as benefits will have to be cut.