Wednesday, December 26, 2012

Can Pension Funds Be the Soul of Private Equity?


  

From New York Magazine: There’s a key scene in Big where Tom Hanks wakes up, stumbles out of bed, looks in the mirror, and discovers that he’s been turned from a 12-year-old boy into a full-grown, powerful man. Something like that happened in the financial world last week when the California State Teachers Retirement System, a public pension fund, found itself bossing around Cerberus Capital Management, the mighty New York private-equity firm. Cerberus, it emerged, owns the company that makes the Bushmaster semiautomatic rifle used in the Sandy Hook spree (along with other gun companies). CalSTRS, which has $750 million invested in Cerberus funds, made it known that it wasn’t happy about this news.

Hours later, Cerberus — whose CEO's father lives in Newtown — announced that it was putting its firearms holdings up for sale.

It was a rare turn of events in the private-equity business, which typically sees pensions bowing to buyout shops, not the other way around. And now….

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