Every morning, we run the Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.
But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.
It’s Forbes contributor technical gobbledygook, so click at your own peril. But I admit, I was fascinated by the handy tool to choose-your-adventure on how to Tweet a link to the story. Little nudges everywhere.
In case you don’t have a baseline for this kind of thing, $5M/Partner is…really good. But as headline-friendly as representing Tesla’s board would be, there’s gotta be more to the story to get to that kind of number for a firm with meaningful reliance on its fund formation practice…
CalPERS Moves Forward on Private Equity Revamp [Institutional Investor]
Ah. Well there you go.
Leave aside the windfalls for the Paul Weisses of the world for a moment. Yes, I rolled my eyes a bit at this whole PE episode, too. We (and many others) have been predicting this was the inevitable direction for many public pension plans for years. It’s frustrating that we’ve now reached this point – but nowhere near as irritating as the armchair CIOs on social media and traditional financial media ripping into the statement.
The right response for the staff of these funds isn’t derision, but empathy. It’s an almost intractable situation. They can’t force the state to take an axe to benefits. They can’t force the state to fund the plan with taxes. Most of them can’t even change their target rate, or the cost of living adjustment mechanics, without board and sometimes even legislative oversight. The consultants – risk transfer instruments for the board – are coming in hot and painting the staff into a corner with capital market projections that show both the magnitude of expected returns shortfalls and a light at the end of a tunnel that only passes through levered private markets investments and wishy-washy emerging markets overweights.
Like me, are you uncomfortable putting all the eggs of an increased risk-taking strategy in levered illiquid US small caps? Good. OK, let’s run through our alternatives:
Do you want to argue for layering on futures-based leverage in California? Cool. Yeah, we’re not going to let you take that kind of headline risk for us. You’re fired.
Do you want to argue for a public-only passive solution, trusting that returns will be enough? Cool. Yeah, our consultant’s telling us that would be imprudent. You’re fired.
Do you want to argue for a reduction in benefits? Whoa, stay in your lane. Also, you’re fired.
The railroading of public pensions into private equity is lamentable. It’s worth talking about. But let’s talk more about the things that are causing it – agency structures and a political unwillingness to talk about the inescapable interplay between return outcomes, benefits and tax outlays – and maybe a bit less about the staff forced into impossible situations.
Hemp, Inc. Subsidiary, The Hemp University, Announces its First West Coast, All Day Seminar in Ashland, Oregon [Business Insider]
LPT: Stick to sativa strains or else the afternoon is going to be a real drag.
$250/Night, y’all, cash in advance.
Deutsche Bank and Commerzbank are finally merging – but critics worry about job cuts and patchy past deals [Business Insider]
“I really didn’t like his form on that Hail Mary pass, Tom. It’s almost like he just threw the ball up in the air and prayed that someone would catch it.”