Kentucky state employees recently filed suit against several private equity firms and their failure to provide rates of returns as expected. According to the lawsuit, Kentucky Retirement Systems, invested between $1.2 billion and $1.5 billion, with:
• Blackstone Group
• Capital Partners and
• Pacific Alternative in August 2011.
Based on the sales pitches, KRS trustees expected lower risk, increased liquidity and returns of 7.75% on an ongoing basis without market risk.
The investments delivered on none of these things, the lawsuit says, but “[T]hey did generate excessive fees for those hedge fund sellers, poor returns and ultimately losses for the funds, in the end damaging KRS and Kentucky taxpayers.”
The lawsuit also names several members of the Kentucky Retirement System board of members. The board is entrusted with responsibility of maintaining control over who manages employee’s retirement funds. Additional management issues are also affecting the retirement fund for Kentucky employees, the amount of promised benefits is in excess of $26 billion more than is available. I guess the question to ask is how did the retirement system in Kentucky get in this mess?
Amazingly, an organization the size of Kentucky can be so duped into thinking that they can receive benefits of an expected 7.75%. How insane.
Safety, security, liquidity and returns far more than the norm, who was possibly watching the hen house when these foxes came around?