Tuesday, March 30, 2010

CalPERS Leads PEU Investor Push Back

Investors saved private equity underwriters (PEU's) from Lehman Brothers' fate by ponying up capital. CalPERS received $2.8 billion in capital calls from PEU's in fall 2008. Their option? Sell their investments in a virtually nonexistent secondary market, thus CalPERS paid up. Investors want more than a "thank you" for their efforts.

They summonsed major private equity firms. Dealbook reported:

Executives of the Carlyle Group, TPG, Avenue Capital Group and Kohlberg Kravis Roberts are planning a meeting Tuesday with investors who are seeking lower fees and more control over their investments, Bloomberg News reported, citing three people briefed on the gathering.

The meeting, which
Bloomberg said will be moderated by the Calper’s chief investment officer, Joseph Dear, follows the release earlier this month of a “set of principles” by the Institutional Limited Partners Association, a group that represents 215 members controlling more than $1 trillion in private-equity assets. The so-called wish list, first reported by The Wall Street Journal, included calls for a cap on fees, more disclosure and greater investor control for clients of buyout shops.
Maybe the right to say "no" to capital calls?

How did the PEU boys respond?

“at least three large private-equity firms have retained outside counsel to examine potential antitrust issues.

Carlyle has an interesting history of using lawyers.