Friday, August 7, 2015

Dutch Pension Fund Saw Carlyle's Fees from the Inside at AlpInvest

Naked Capitalism reported:

The Wall Street Journal broke a story that is guaranteed to rock the private equity industry. The giant Dutch pension fund PGGM, which manages over $200 billion in the form of the retirement assets of social workers and nurses, has said it will stop investing in private equity funds that refuse to make full disclosure of all fees and costs. 

Despite being less than a household name in the US, PGGM is a large and influential private equity investor.
PGGM sold AlpInvest to Carlyle in two stages.

AlpInvest Partners has been investing mainly on behalf of its major clients APG and PGGM Investments, asset managers for two large Dutch pension funds. In 2011, APG and PGGM transferred the ownership of the management company to The Carlyle Group and AlpInvest management. Effective August 1, 2013, Carlyle acquired the remaining interest in AlpInvest from AlpInvest's senior management. APG and PGGM will continue to be amongst our most important investors. 

Bloomberg reported on the 2013 deal that gave Carlyle 100% of AlpInvest:

AlpInvest, which oversees 37 billion euros ($48 billion) invested in private-equity funds and other deals, is part of Carlyle’s Solutions business.  

Whether PGGM remains one of Carlyle and AlpInvest's most important investors will hinge on full fee disclosure. I'll venture PGGM saw plenty regarding Carlyle's fee structure through their additional $10 billion in AlpInvest investments 

Naked Capitalism wrote:

PGGM isn’t simply responding to these new requirements. It’s putting the entire private equity fee-gouging regime in its crosshairs, and demanding that fees bear a reasonable relationship to costs. Europeans, who don’t hold financial buccaneers in high esteem, do not regard private equity multi-million dollar pay packages as reasonable costs that they should have to support.

Most of the money that PGGM manages is on behalf of the PFZW pension fund. More than half of PFZW’s €811 million fee bill in 2014 went to private equity. Yet private equity only accounts for 5.6% of PFZW’s €162 billion of assets.
That's a ten bagger fee wise for the PEU boys.  PGGM appeared to have learned from their interaction with Carlyle, as opposed to CalPERS, which held an equity stake in The Carlyle Group for over a decade.