“Who comes first, the investors or
the person who manages their money? That question is crucial for any investor.
But it poses a special challenge for retired firefighters, police officers,
teachers and other employees who may not know that their retirement money is
being held in private equity funds.
“These are opaque and costly investment vehicles that borrow
money to buy companies and sell them, ideally, for a profit. The secrecy under which
this $3.5 trillion industry operates has essentially required millions of
people whose pensions are invested in these funds to simply trust that they are
being treated fairly.
“Yet the funds impose fees under
terms that create conflicts of interest between investors and general partners
who run private equity firms. A little-known practice involves discounts that
the firms obtain from lawyers and auditors but do not always share fully with
investors. A dive into regulatory filings over the last month revealed that 12
private equity firms said they had actual conflicts of interest in connection
with such discounts, while 29 more described potential conflicts. Altogether,
the 41 firms oversee almost $600 billion in client assets, documents show. The
disclosures appear in documents the firms filed with the Securities and
Exchange Commission as registered investment advisers…”
For the complete article from the New York Times, click here: When Private Equity Firms Give Retirees the Short End by Gretchen Morgenson
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