Private Equity’s Opaque Costs Mystify the Pensions That Pay Them
On top of management fees, investors pay for a variety of funds’ business expenses, from travel to research to “other.”
The stewards of billions of dollars in retiree savings are struggling to account for fees charged by one of the wealthiest industries on Wall Street.
Investors who put money into a private equity fund expect to pay a management fee as well as a share of their profits to the firm running the fund. But on top of those costs are agreements to cover expenses ranging from dealmaker travel to dinners to news subscriptions. And it’s proving difficult to determine how those dollars are spent.
A Bloomberg analysis of data collected from more than two dozen U.S. public pension plans shows that most of those investors aren’t tracking details of so-called partnership expenses across their private equity portfolios. Some say the task is too difficult because fund managers are reporting the costs in vastly different ways or fail to break out expenditures at all.
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