Let’s stipulate from the outset that The Intercept is a media outlet that pushes a progressive agenda hard enough to break a wrist (h/t Raymond Chandler). Even so, Matthew Cunningham-Cook’s deep dive into how Gov. Charlie Baker has appeared to play footsie with his financial backers is pretty eye-popping.
FIRMS THAT BACKED GOV. CHARLIE BAKER’S PRO-CHARTER INITIATIVE SCORED MILLIONS IN CONTRACTS WITH MASSACHUSETTS PENSION FUND
Three private equity investment managers who supported the Yes on 2 campaign in 2016 have since seen their companies receive a windfall of new investments.
IN THE 2016 ELECTION, executives at high-fee, high-risk investment firms poured cash into a Massachusetts pro-charter school initiative championed by Gov. Charlie Baker. In the years since, those investment firms have reaped a total of $320 million in new lucrative investment management contracts with the state pension fund.
The Massachusetts Pension Reserve Investment Management Board, which oversees more than $74 billion in assets covering 300,000 beneficiaries, frequently touts its investment performance that helps to provide $1 billion in benefits annually. Baker sits on the MassPRIM Board via a designee and appoints two additional members.
A comparison of the pension fund’s return to a straight and simple 70/30 portfolio — wherein 70 percent is allocated toward the S&P 500 and 30 percent goes to a blue-chip bond index fund — reveals underperformance, with the pension returning 10.4 percent annualized for the five years ending December 31, 2020, and the index fund returning 11.58 percent, costing the commonwealth of Massachusetts, its taxpayers, and active and retired public employees more than $5 billion over that period
The numbers are knee-buckling. According to the Intercept piece, executives from three private equity investment managers – Summit Partners, Berkshire, and Charlesbank Capital Partners – funneled $1.34 million in contributions to various pro-charter school groups in 2016 and subsequently reaped $475 million in MassPRIM investment commitments between 2016 and 2018.
Beyond that, according to the Intercept piece, the three firms are reaping unusually large profits from their management of taxpayer dollars.
Summit, Charlesbank, and Berkshire are all so-called alternative investments, meaning that they are subject to much less regulation than public companies and charge enormous fees that are typically 2 percent of assets and 20 percent of performance, which is over 5,000 percent higher than index funds for ordinary stocks and bonds, which can have fees as low as 0.04 percent or lower.
Even worse, the piece says that two of the investment firms have produced returns that significantly trail those of the S&P 500. MassPRIM declined to provide performance data about the third firm.
Also trailing? The local dailies. The Intercept piece dropped five days ago, and so far we haven’t heard a peep out of the Boston Globe or the Boston Herald. We get it that news organizations avoid Xerox journalism whenever possible, but surely five days is long enough to 1) move the story forward, 2) poke holes in it, or 3) get Charlie Baker to address it.
Or are we missing something here.