Monday, January 30, 2012

South Carolina State Treasurer Smells PEU

Curtis Loftis, South Carolina's Treasurer, wants the state's pension fund to lighten up on alternative investments.  WSJ reported:

Just five years ago, it was illegal for South Carolina's public pension plan to invest in hedge funds, private equity and other complicated bets.

Now, nearly half its assets are in such investments.

Loftis believes this allocation is far too high.

(Loftis is) fed up with years of high fees on the state's hedge-fund, private-equity and real-estate investments, and their complex terms, which he says are incomprehensible to the average taxpayer.

"I question whether Wall Street's interests are being protected or our interests are being protected," says Mr. Loftis.

The Carlyle Group's David Rubenstein called on Loftis in August 2011. The hour long session was an attempt by Rubenstein to touch his client. Loftis understands the private equity underwriter (PEU) mentality:

"He's a great man," Mr. Loftis says about Mr. Rubenstein. But, he added, "these people are not my friends. If I weren't the treasurer of South Carolina, they wouldn't take my calls."

No, they would not. PEU's focus on the 2 and 20, which Loftis stands to threaten.  They'd hate another PEU run.  How much did South Carolina's pension pony up in Carlyle capital calls in the 2008 financial meltdown?  CalPERS kicked in $681 million.

How much did South Carolina's alternative investment exposure rise keeping PEU's from swirling down the cash drain?  Rest assured, David Rubenstein won't say.  He probably views it as a discourteous question.