Naked Capitalism reported on the ongoing saga of CalPERS, a public pension fund, worshiping at the feet of private equity underwriters. I believe this is rooted in two factors. The first is CalPERS twelve year ownership of 5.5% of The Carlyle Group. During this time CalPERS likely cheered for private equity's excessive fees and opaque ways as they benefited the pension fund.
Carlyle's David Marchick told the U.S, Senate in 2008:
CalPERS and Mubadala each receive a quarterly or annual financial report, and we will work hard to produce an attractive rate of return for both entities. Both CalPERS and Mubadala are sophisticated investors, and we are grateful for the confidence they have shown in us.The second factor is current management practice, which utilizes complexity, dishonest framing and fee obfuscation in the pursuit of excessive returns via greed and leverage. CalPERS was willing to ignore these sins as nearly everyone else was doing likewise.
It's extremely difficult to challenge agreed upon business theory, even when it's ubiquitously bad. I imagine it was hard to challenge robber baron PEU fees from the inside, especially with CalPERS holding a 5.5% stake in Lord Group of Carlyle.