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.