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In order to understand Robert Mercer’s brilliant financial engineering,  let’s begin our analysis using three outstanding local Portland beers.  They are Rogue Brewery’s Shakespeare Stout, Widmer’s Hefeweizen and Deschutes Breweries Fresh Squeezed IPA.  All are distributed by Portland based Columbia Distributing, one of the nations largest beer distributors, which was purchased by the Jim Simons controlled investment fund Meritage in 2012.  Simons along with Robert Mercer are Co-CEO of the $100 billion Rentec hedge fund.

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This analysis will unravel the relationship between Rentec’s Medallion fund, its company retirement plan,  the Meritage private equity fund, which purchased Columbia Distributing in 2012, and numerous tax exempt foundations including those of Jim Simons, Nat Simons and Robert Mercer.

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See prior September 18. 2017 blog post  for important background regarding PERS adoption of age weighted IAP accounts.

Once again, it appears that younger workers are being short changed by PERS in the adoption of age weighted IAP accounts.  Remarkably, there was no opportunity for public discussion on vendor selection or strategy regarding how the age based portfolios would be constructed.

Rather, it was announced in September that the French insurance conglomerate AXA’s subsidiary Alliance Bernstein, what some call the AIG of France, would be awarded the contract to manage more than $8.2 billion in participants IAP accounts.   Some will argue that this isn’t really an $8.2 billion contract since it will simply involve reshuffling assets among participants internally.  My thought would be, tell that to the participants.

Paris Based AXA and Le Vie Bonne Courtesy of Oregon PERS

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One obvious question to PERS directors and Democratic State Treasurer Tobias Read is why a domestic vendor was not chosen for this important public contract.  All sitting members of the Oregon Investment Council were appointed by Democratic Governors.   And where were the labor unions?

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In 2004 the State of Oregon decided to isolate the “employee contribution” part of PERS and put these amounts into what are called IAP (Individual Account Program) accounts. These 200,000 IAP accounts are essentially a defined contribution program, not unlike a 401K, for which members earn returns based upon market results with no guaranteed rate of return.

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Index based investment using a company’s total stock market value is a great concept and indexes such as the S&P 500 generally provide solid low cost diversification.

Unfortunately, Wall Street has now applied this concept to “sectors” of the stock market without adjusting for the size of individual companies.  This is not only exposing investors to added risk due to poor diversification yet also handicapping newer smaller companies on which the future economy is dependent.

Let’s take a look at the two largest holdings in the MSCI Health Care Sector Index.  An index used by more than 97 percent of all large fund managers.

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Doris is 85 and suffers from moisture build up in her eye, what some call wet eye.   She is on Medicare and gets treated with Eylea, a Regeneron product, every 4-5 weeks.  Each treatment costing $6,200.   That is more than $70,000 per year even though Doris never made more than $40,000 while working.   Her total out of pocket cost is $10.29 per treatment.

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    Senator McConnell’s Dilemma:   To Serve Patients or Investors?

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When evaluating health care investments it is important to analyze the structure of leading drug and medical equipment companies.  A close look indeed reveals a derivative driven system in which private equity and hedge funds increase demand for drug payments by purchasing the rights to the cash flows from key drugs.  Patients are indeed unaware that many of the drugs they consume are now owned in part by private equity investors.

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Trump Mercer Simons Koskinen Bharara

See Latest Post on Nov 27 For Significant Updates After Release of the “Paradise Papers” – Access Via Blog Search for   Trump Patron

President Trump’s most significant backer, Robert Mercer (CEO of the giant hedge fund Renaissance Technologies), is Deutsche Bank’s largest customer.   Deutsche Bank is indeed also President Trump’s and Jared Kushner’s largest lender.  One phone call from Mercer and either should be able to refinance or gain a new loan, as both did in 2016.

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