Mr. Woodruff"s arguments ignore a number of significant facts about the overwhelmingly positive gains private equity has produced for millions of pension-holders in the United States. In my current position as a fund manager of the Public Safety, Corrections, and Elected Officials Retirement Plan of the State of Arizona, I have worked closely with many union members, finance officials and retirement fund managers. Arizona"s State Retirement System now has a target allocation of six percent in private equity and other alternative investments, as do a growing number of states with various allocations. The 20 largest pension funds (by membership) that have invested in private equity represent 10.5 million retirees, including plans from the biggest states. If you surveyed the first responders, police officers, teachers and public servants who depend on pension funds, I doubt you would find any who would protest the record-setting returns that private equity investment partnerships have delivered to their retirement accounts.
Looking beyond the demonizing of Mr. Kravis, let"s consider the real results produced by private equity partnerships -- the majority of which are small and mid-sized funds or firms that invest locally and regionally. Pension retirement funds, both public and private, have directed their members" money to these partnerships and funds, and have clearly been happy with the outcome: Last month, Bloomberg reported that state and local pension funds in the U.S. increased their assets 9.2 percent to $2.3 trillion last year, aided by private equity and real estate returns, according to the 2006 Public Fund Survey. U.S. pension funds" median allocation to alternative investments, such as private equity funds, rose to 4.5 percent last year from 3.8 percent the previous year. With a volatile domestic stock market and a rising number of retirees needing benefits, pension fund managers are looking for the best performance money can buy " and semantics don"t change the fact that it"s found in private equity.
-- Fritz Beesemyer, Fund Manager, The Public Safety Personnel Retirement System of the State of Arizona




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Posted October 31, 2007 | 11:06 AM (EST)