Randomly Noted

So much dirty laundry has come out during the past year’s financial mayhem it’s a wonder I still have the capacity to be shocked. This piece of news shocks me: “Calpers, the nation’s largest public pension fund, is launching a ‘special review’ of fees paid by some of its money managers to an investment advisory firm run by a former Calpers board member,” the WSJ reports online.  It turns out some $50 million in fees were paid over five years to Arvco Financial Ventures LLC, headed by former Calpers board member Al Villalobos. Some poor-performing investments made by Calpers were recommended by Arvco. You might wonder why I’m so stunned by this news. Since Bear Stearns and Lehman, we’ve had all manner of appalling revelations thrown in our faces, underscoring that our national well-being was in the clutches of the unfit or immoral. It still amazes me that establishment pillars such as Calpers, which manages the wealth of  thousands (maybe millions) of California public employees, would be run by a coterie of mutual back-scratchers. Of course, we recently learned that New York’s state fund exhibited similar traits; but California, too? Say it isn’t so! The other day some colleagues were teasing me – saying my criticism of so many titans of finance suggests I’m turning into a “socialist.” Nah, I’m fairly sure people behave badly in just about any economic or political system. In fact, it’s a sign of my visceral faith in free markets’ logic and inherent parameters that I’m still capable of being surprised and dismayed when they go awry. All that’s happening to me – and, I believe, many of you – is that we’re yet again being reminded of the frailty of human nature and the importance of defending oneself, one’s loved ones, and one’s nest eggs against the likelihood that the guardians of wealth are out to increase their own wealth, not ours. Consider this story by the NYT’s Julie Cresswell, which appeared last week. Despite a few thinly reported passages, it’s very well done – and, yes, it reminds one that private equity titans will first and foremost extract massive dividends from acquired companies – and secondarily worry about the health and well-being of the enterprise and its employees. Have a look: human frailty is on full display.