Saturday, November 7, 2015

Missed SEC Projection Caused by Rise of PEUs

NYTimes reported:

Fee secrecy is a major problem with hedge funds and private equity investments, according to Edward Siedle, a forensic pension investigator at Benchmark Financial Services in Ocean Ridge, Fla., and a former Securities and Exchange Commission enforcement lawyer.

“When I started with the S.E.C. 30 years ago, there were two things that the regulators and the regulated agreed on: Money management fees would come down over time and transparency would increase,” Mr. Siedle said in an interview. “But just the opposite has happened. Fees are at a historic high and transparency at a historic low.”
What happened over the last thirty years to make fees outrageous and super secret?  Private equity became ubiquitous. 

Blackstone Group started in 1985
Carlyle Group founded in 1987 
Apollo Global Management 1990
TPG started in 1992
Ares Capital began in 1997
Of the major PEU firms only KKR (1975) and Bain Capital (1954) were in existence when Siedle made his erroneous prediction.  Together these seven PEUs manage over $1 trillion in assets.  

A handful of politically connected corporate chiefs conspired with political lackeys to bring us high pension fees and historically low transparency.  The greed and leverage boys won again.  That's the history lesson.

Update 1-1-16:  CalPERS, a former equity owner of The Carlyle Group, declined the press to make private equity firms reveal the plethora of fees charged as it might alienate the PEU boys.