Opting for high-risk and secretive private equity investments cost Florida Pension fund an estimated $1 billion on six deals 

Pension managers have put $18.7 billion in high-risk and secretive deals, ramping up with $2 billion in the past year ahead of pension reform

By Gina Edwards

Watchdog City Press reporter

April 2, 2013 -- Florida’s pension fund managers make no secret of the fact that the pension fund has been investing in high-risk private equity deals for more than two decades. 

But what has been under cover and kept from public view by government pension managers at the State Board of Administration are the back-up details that are needed to see how poorly some of these deals have performed for taxpayers – and the public employees relying on the traditional pension plan for their retirement. 

Public records obtained by this reporter show that on just six closed-out private equity partnership deals, Florida pension managers earned $351 million in profits. 

That might sound good, but consider this: To get that $351 million profit, pension managers locked up and invested $836 million in public tax dollars over the 12 to 15 year life of these deals.

Together, these six private equity partnership deals performed significantly worse than the overall stock market. 

If SBA pension managers had instead put that public money upfront in a stock market index fund based on the Russell 3000, a broad measure of overall stock market performance, the public money would have grown to $2.2 billion. 

In essence, these high-risk bets on private deals cost taxpayers an estimated $1 billion. 

So Florida pension fund managers took on substantial added risk — and dramatically underperformed the stock market.  

The six firms that sold these private partnership deals to the state of Florida collectively made $86.4 million in fees, according to SBA records provided in response to public records request by this reporter. That’s 10 percent. A typical index fund charges less than 1 percent.  

How the public money was used — what companies were bought and sold and propped up in these private deals — is secret under a 2006 Florida law that keeps vast amounts of deal details confidential 

Click Buy it Now to Access this In-Depth Story: 2,900 words. Includes charts of these six closed out private equity deals compared to the Russell 3000 stock market performance index. 

First published April 2, 2013