News

UNI affiliate, the SEIU has taken the initiative to assist the introduction of a bill into the Californian State Assembly to ban Californian public employee pension funds from investing in private equity firms backed by sovereign wealth funds. Increasing trends in partnerships between sovereign wealth funds with private equity; a byproduct of the credit crunch, has raised the level of concern by governments and community stakeholder alike for numbers of reasons. Lack of transparency of the fund, risky leveraged debt used as the financial return strategy, little incentive to invest in local community infrastructure investment and the political concern for the motivation of these firms are some of the reasons for concern. The initiative to introduce this bill is the first of its kind and UNI will take a keen interest in its progress. Details of the bill can be found at:

http://www.leginfo.ca.gov/pub/07-08/bill/asm/ab_1951-2000/ab_1967_bill_20080214_introduced.pdf



The introduction of this bill is indicative of the growing fear for private equity activity particularly when workers pensions are being used in the financial debt game. How much longer private equity deals will continue to reap large returns is a game of chance. Some leading private equity practitioners such as Jon Moulton of Alchemy Partners already claim the end is here. In his opening address to the Super Returns private equity conference in Munich last week he said:



“There will be large private equity failures this year and next, and press and politicians will get onto us”



Moulton Warns private equity firms to expect ‘large failures’

David Teather, The Guardian 27/02/08



This is little comfort for the ‘mum and dad' investors with their money tied up in private equity firms by their pension funds.