Time For Public Pensions To Track Fund-Flow

When a public pension system commits capital to a private equity fund, it typically discloses several pieces of information. Things like commitment size, the fund’s basic investment strategy and the fund’s senior management. What’s missing, however, is any detailed information on how the fund was sourced or diligenced. That’s got to change, and quick.

I’m not proposing a full proctology exam here, just a basic timeline. For example, who was the first person to approach the pension system about the investment opportunity? And who did that person approach? And so on…

If that initial contact is between a “finder” and a member of a pension’s board, disclose it. If the initial contact comes at a conference between a GP and a member of the pension’s investment staff, disclose it. If the initial contact is between a GP and a pension system’s designated consultant, disclose it. And then tell us how the process progressed from there.

Not only would such documentation prove invaluable amidst charges of impropriety — like we’ve seen in New York, Connecticut, Ohio, Illinois, etc. — but it could also dissuade grifters and glad-handers in the first place. After all, one reason that such slime flows through the halls of power is because the lights are intentionally kept dim.

I’ve spoken to several public pension staffers about adding this type of disclosure requirement, and they all found it feasible. A bit onerous at first, but something that could certainly be incorporated into the workflow. So let’s get going, before Chooch II gets green-lit.