Monday, July 11, 2011

Customized PEU Pension Accounts: MERS, Carlyle Group & AlpInvest

Municipal Employees Retirement System of Michigan, a $6.5 billion public pension fund, will invest $750 million with private equity underwriters (PEU's).  The Carlyle Group will manage $250 million in a "new managed account," while AlpInvest will get the remaining $500 million. 

Underfunded public pension funds roll the dice with PEU's to garner return.  PEU's have shed employee pension funds to make the numbers work, making MERS investment a Faustian bargain.

Dealbook reported Carlyle's purchase of AlpInvest closed last week.  Adding AlpInvest's $59 billion under management to Carlyle's $107.6 billion gets the PEU to $166.6 billion.  That figure sounds ominous.