Saturday, January 28, 2012

We love... no, hate... private equity

The Wall Street Journal reports that many of the same public-employee unions that have attacked Mitt Romney for his private equity career are increasingly pouring their own pension money into ... private equity. Awkward.

According to the Journal, large public pensions now have about $220 billion, or 11% or their total assets, invested with firms like Bain Capital, the private equity giant where Romney made his fortune. That's $50 billion more than a year ago. ...

It would be easy to play gotcha here. But that's less interesting than looking at what all this says about private equity's rising profile in the contemporary world of finance. Public pension funds are turning to these investments as they strain to hit their yearly return target of 8%. ... As one source told the WSJ, today's pension-fund managers "would say you may be breaching your fiduciary duty if you avoid this asset class."

Translation: If these funds weren't investing in private equity, they wouldn't be doing their job.
--Jordan Weissmann, Atlantic Monthly, on the portfolio returns you can't live without