http://www.nakedcapitalism.com/2015/08/calpers-st…
Quite the interesting read. This is astounding to me.
Jelincic returns to his 2005 vintage fund example. The facts he pulls from it are simple: 1.5% management fee, so that with CalPERS’ commitment amount, the annual management fee should be $180 thousand. But the CAFR shows CalPERS paid only $30 thousand. He asks Desrochers for what could account for the disparity. If you look at the video, you will see Desrochers responding like a hostile witness in a trial. He fails to mention the most obvious reason, the management fee offset. When Jelincic brings that up, Desrochers then tries the tactic of saying at considerable length that the offsets vary by fund as a way of again dodging the issue. Jelincic continues:Jelincic: Let me repeat the question. If the manager charges fees to the portfolio company and shares that with the LPs, would the LPs’ management fee be reduced?
Desrochers: Yes.
Jelincic: Okay. And the – because the GP got the same amount of fees, but they got part of it from the portfolio company, and part of it from the LPs, correct?
Desrochers: I’m sorry. No, repeat that. No, because – no, it doesn’t get the same amount of money.
Either Desrochers does not know what the normal operating expenses of a private equity fund are, or he is so unwilling to answer any questions about private equity that he’ll put as much noise as he can in his signal so as to grind any inquiry to a dead halt.
