We need an education on the 'plunderers' of private equity handling billions for Alaskans in secrecy
Alaskans don’t know enough about private equity.
Gov. Mike Dunleavy went to Berlin to speak to the so-called “ESG summit” on the topic of “Demystifying Alaska; why global investors should pay attention to Alaska.” The Berlin conference attracts private equity investors from around the world, including some who manage money for Alaskans.
Among the other speakers are David Rubenstein, one of the key people in the development of the private equity industry, who has a estimated net worth of $3.2 billion, and his daughter Ellie Rubenstein, who was appointed by Dunleavy as a trustee of the Permanent Fund Corporation.
Ellie Rubenstein is managing partner of Manna Tree, a Colorado-based company.
The Alaska Permanent Fund and the state’s retirement systems have billions of dollars invested and managed by private equity companies.
We know little about the specifics because of blanket confidentiality rules. We are told to trust that the experts know what they are doing. Perhaps that’s true.
What we don’t hear from anyone in Alaska state government or from Alaska news organizations is any discussion of the impacts of this investment category for the state, the nation and the world.
Because of the billions these firms are investing on behalf of Alaskans, greater exposure and understanding is essential.
A new book by veteran reporter Gretchen Morgenson and Joshua Rosner should be required reading for Alaskans: “These are the Plunderers: How Private Equity Runs—and Wrecks—America.”
They raise vital questions with implications for how Alaska’s money is being managed and invested.
Their publisher says, “These are the Plunderers lucidly and maddeningly traces the thirty-year history of corporate takeovers in America and private equity’s increasing dominance. Morgenson and Rosner investigate some of the biggest names in private equity, exposing how they buy companies, load them with debt, and then bleed them of assets and profits. All while prosecutors and regulators stand idle.”
The Alaska Permanent Fund Corporation has a responsibility to inform Alaskans about the risks, rewards and societal consequences of what is being done on our behalf.
The corporation is not forthcoming about this and the Legislature, contrary to a clear state law, does not provide the annual report required on fund investments. That missing annual report would be one place for a review of Alaska’s private equity experiment.
The permanent fund had $15.7 billion in private equity investments a year ago, with 17 percent asset allocation target.
“APFC's private equity program seeks to build a diversified, global private equity portfolio, focusing on buyout, venture capital, real asset, and distressed credit opportunities through primary partnerships, secondary acquisitions, co-investments, and targeted direct investments in operating companies,” the fund says.
APFC can start by providing more details and do it in English, avoiding the investment jargon it relies on in public communications, concealing more than it reveals.
“The less said the better” might be the corporate motto about this aspect of our investments, but that should end. This is one of those areas where cash returns should not be the only thing to take into account.
The Permanent Fund was once one of private equity’s “most enthusiastic and esoteric investors,” according to Private Equity International, but cut its target allocation last monthy to 15 percent by 2025, down from what had been a goal of 19 percent. The field is “not very attractive right now,” chief investment officer Marcus Frampton said at a board meeting.
Below s a discussion between Morgenson and author Walter Isaacson about her analysis of private equity and the broader impact on society. It’s no surprise that the private equity industry says she is all wrong.