Today, in its monthly meeting, the Oregon Investment Council, which manages Oregon’s $70 billion in PERS and related public assets, continued its commitment to leveraged buyouts by private equity firms, this time in Europe as it provided $500 million to KKR and $300 million to CVC European Equity Partners. Now at 13 percent of total assets, its stated goal is that 16 percent of assets be dedicated to private equity.
Michael Smith of CVC Group, pictured above on left, noted that the future in Europe is consolidation and their key strategy will be to use European based firms to acquire american competitors.
A representative from KKR added that banks were sitting on 6 months of “deal flow” they need to sell to improve their liquidity. And so while most people think that the subprime mortgage crisis is the primary source of liquidity issues in the financial markets, clearly the KKR executive painted the real picture, that being that leveraged buyouts are in fact soaking up much of the new loan dollars. And they are doing these buyouts with mostly public pension dollars.
To summarize, in addition to $350 million approved for private equity by the private equity investment subcommittee at its last meeting, Oregon PERS today also dedicated the $800 million to European buyout firms in addition to another $200 millon for domestic buyouts. A final investment of $50 million was also made to a real estate fund, making the total committed for the month approximately $1.4 billion.
The current Chair of the Oregon Investment Council, a practicing CPA whose business interests clearly intersect with those of the council, is clearly making his mark by accelerating the allocation to controversial private equity and hedge fund investments.
Solomon’s addition to the council and immediate rise to the Chairman position was championed by the State’s most powerful lobbyist on the Democratic side, Len Bergstein. Bergstein, pictured below Solomon on the right, was also instrumental in developing Neil Goldschmidt’s career, pictured on left, and orchestrated Goldschmidt’s successful run for Governor in the 1980’s. Although Goldschmidt is back in Portland, Bergstein is now the “go to” lobbyist on the Democratic side. It is not known what Goldschmidt is now doing yet it is somewhat ironic that given hedge and private equity funds do not disclose their owners or investments, he could theoretically be running such a firm.
The only one of the five voting council members not present was Keith Larson of Intel Capital. Chief Investment Officer Ron Schmidt noted Larson had a scheduling conflict. Interestingly, Larson’s name still does not appear on the Oregon Investment Council website. Noted instead is his predecessor Mark Gardiner whose term expired in September. Clearly, Larson has no business being on the council due to conflicts of interest, as is the case with Solomon. Either’s presence on such a board would have been unthinkable 10 years ago yet the SEC still has no oversight over public pension funds boards.