Wednesday, April 2, 2014

CalPERS Vs. Naked Capitalism?

Yves Smith, aka Susan Webber, of Naked Capitalism posted a blog comment, CalPERS Tries Ineffective Mudslinging in Response to Our Ongoing Private Equity Investigation:
I hope readers don’t think I’m turning Naked Capitalism into “all CalPERS, all the time”. However, it was only yesterday that I learned of a press release that the California Public Employees’ Retirement Systems issued last Friday about our suit against the giant public pension fund. And as you’ll see, this document begged for a response.

By way of background, last September, we filed a Public Records Act request (California’s version of FOIA) for private equity return data that CalPERS had not previously published. While CalPERS has published quarterly data on a fund-by-fund basis since settling an earlier Public Records Act case in 2002, three researchers at Oxford published a paper in 2013 which discussed specifically and in detail how they were the first to obtain the entire history of CalPERS’ investing in private equity, back to its first participation in the strategy in 1990. They stated that they got previously non-public data back to 1990. In addition, the paper indicated that the scholars obtained cash flow information on the timing of capital contributions (when the private equity funds asked them to send money) and distributions (when the private equity funds returned money, most often via the sale of companies). For more background, see this post.

Note that in California, once an agency has given out a record to one member of the public, it has forever waived the right to claim any exemption from disclosing the records to others. So it seemed that our PRA request should be straightforward. Silly us.

You can find the blow-by-blow of CalPERS’ inconsistent actions and disconnect between its statements (that it was cooperating) and its actions (delivering records that fell well short of what we’d asked for) here and here.

The latest development is their press release, which is revealing, and not at all in a good way. Let’s start with the fact that it is highly unusual for a large organization to respond to a lone critic, particularly an entity like CalPERS, which does not face the pressure of adverse stock price movements or analyst follow-through. In other words, this is a remarkably defensive response to a small-potatoes lawsuit.

Second is that if the point is to reach the public, this press release appears to be ineffective. I now have a number of former CalPERS employees who are interested in the issues I’ve raised and are part of various relevant social networking groups as correspondents. I heard about the press release only today from one particularly vigilant CalPERS watcher. So from what I can tell, CalPERS’ missive is not making the rounds.

But the big surprise is how inept it is and how many falsehoods it contains. This is looks to be a classic case of an organization trying to believe its own PR, except in this case the PR is pretty poor.
You can read the rest of this excessively long post here. Let me begin by telling you that I once published my comments on Naked Capitalism and appreciated the exposure Yves gave me. But I moved over to Zero Hedge when she started editing my comments without my permission (wrote about it here). Apparently, she has every right to ramble on endlessly in her comments but I had to cut mine short. I was booted off Zero Hedge because the moronic trader wannabes on that site could dish it out but they couldn't take my attacks (Tyler Durden, or as I affectionately call him Turden, remains the biggest self-promoting douche in the blogosphere). Both Naked Capitalism and Zero Hedge removed my blog from their blog roll but I kept theirs on my blog roll (because I am more mature and want people to make up their own mind).

It's funny that Yves Smith, aka Susan Webber of Aurora Advisors, is demanding transparency from CalPERS because I challenged her and Tyler Durden to fess up as to who is funding their respective blogs. In particular, is George Soros, a client of hers, funding Naked Capitalism and are Eric Sprott, Kyle Bass and a bunch of other short-selling gold bug hedgies funding Zero Hedge? (see Yves Smith's response in postscript below).

I'd be more than happy to tell them who is contributing to my blog but it's fair to say that LTK Capital Management is by far the primary contributor to my efforts (although Tatiana and Svetlana of MCM Capital Management throw me a bone once in a while, lol!).

Having said this, I don't understand why CalPERS won't just shut up and comply with her FOIA request. If they provided the data for these Oxford academics, they should provide it for anyone else requesting it. In fact, I think CalPERS and every other public pension fund should provide detailed quarterly cash flows in Excel files on their website for every single private market fund investment they farm out to managers or do directly in-house (with an appropriate lag).

Wake up folks, we live in an era of mistrust. I just finished writing about whether the U.S. stock market is rigged and followed up with a comment on the great HFT debate. CalPERS which is suppose to be a leader on corporate governance, should lead by example and implement radical transparency on all its private equity and real estate investments, especially after it lost multi billions in these investments following the crisis. I have three words for all you public pension fund honchos regularly reading my blog: Transparency, transparency, transparency.

I know all the bullshit arguments public pension funds will throw my way. "Leo, top-decile PE funds and hedge funds want to guard their secrecy. We can't be too transparent or else we won't be able to invest with the top funds." My reply is "fuck 'em" and I'm dead serious about this just like I was dead serious when I wrote in my comment on the hedge fund curse that the ILPA should use its clout to significantly lower hedge fund and private equity fund fees.

CalPERS private equity is a huge mess. They are revamping their PE portfolio and striking fear into PE firms but they have a lot more work ahead to clean up the mess they inherited. In other words, I think CalPERS has more serious issues to deal with than Susan Webber and Naked Capitalism.

Below, Ron Suskind, author of "Life, Animated," shares his personal story about his family's struggles with his son's autism, and reveals some startling facts from a Centers for Disease Control study that shows autism is on the rise. One in 42 boys are diagnosed with autism, reveals Suskind. Today is Autism Awareness Day so take the time to listen and contribute to the National Autism Organization or any charity that helps families raising kids with autism.

Postscript: Yves Smith of Naked Capitalism responded to my blog comment:
Denigrating writers, including me, is in violation of my site's policies. Your post contains false and defamatory material.

The name of Soros Fund Management appears on my clearly outdated site for my dormant management consulting business. The only reason I keep the site up is it has all of the articles I wrote from the early 1990s through 2008.

I worked from them on retainer for six months in the early 1990s. I have not received a dime from them since then. Nor do I have any major or even minor investors as sponsors. Why would I run all those tacky ads if I had a backer or two? And why would I be a constant critic of financial firms of every flavor?

I also raise money in my annual fundraiser from small contributors.

But I do thank you for saying CalPERS should give me the data.
Let me be clear, I did not denigrate Yves, only Tyler Turden, and I'm glad she came clean on who her backers are. CalPERS was dumb to respond to her blog comment, blowing her request way out of proportion and giving her free promotion in the process.