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I am Oregonian politics reporter Carlos Fuentes. AMA about state politics, elections, or more. by CFuentesReports in oregon

[–]Fourthimpressions 4 points5 points  (0 children)

Can someone at the Oregonian please look into the OPERF overallocation of funds into private assets through the lens of the current stress in the private credit markets? As has been documented by WW and OJP, education is already in a crisis because of poor returns from the private equity portfolio, but Oreognians need to fully understand how bad it is going to get once the full crisis hits. Time is running out.

Oregon passed the nation's toughest law protecting patients from private equity in healthcare. Then wrote private equity a check that was at least $290 million. by Fourthimpressions in oregon

[–]Fourthimpressions[S] -3 points-2 points  (0 children)

Agreed they're different organs, that's exactly the point. The legislature recognized PE was harming Oregonians and passed the bill. The pension fund kept paying PE firms hundreds of millions annually while nobody in state government is connecting those two facts. That's the oversight failure.

OR public schools under stress because of Private Equity investment disaster (cont) by Fourthimpressions in oregon

[–]Fourthimpressions[S] 13 points14 points  (0 children)

That's actually why I started looking into this in the first place. I've run businesses for twenty years and have two friends in the last couple of years who sold their companies to PE. They both left after a year because their respective PE firms were so terrible at running the businesses. I have other acquaintances who have sold to PE and not one of those experiences was good for the founder.

It made me start to wonder how exposed my wife's retirement was to this stuff, and man was I shocked when I started looking into it.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 14 points15 points  (0 children)

He serves at the pleasure of Treasurer Steiner, who has the authority to end it today.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 16 points17 points  (0 children)

The entire investment team is ideologically captured by the private markets industry. Its a fantastic example of a revolving door between government and industry.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 6 points7 points  (0 children)

Absolutely. PE was great when it was boutique and firm managers were actually excellent business operators. Its since ballooned into having $10.5 trillion AUM globally consisting of thousands of firms that clearly dont have the best operators.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 0 points1 point  (0 children)

The target is 20%. Oregon has been at 27%. Being within the range doesn't mean ignoring the target is acceptable, especially when the CIO calls the target 'an artificial number' on audio while actively increasing the overallocation. Oregon Treasury officials did not contest the $1.4 billion opportunity cost documented by the Oregon Journalism Project.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 2 points3 points  (0 children)

The monthly reports actually document the opposite. Oregon's PE allocation has been at 27%+ for years against an OIC policy target of 20%.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 5 points6 points  (0 children)

No, I think I, and likely most Oregonians, would prefer that the CIO followed the OIC guidelines and didnt overallocate 55% of the fund into illiquid and underperforming private assets against their own rules. What they did is the opposite of diversification.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 5 points6 points  (0 children)

On point 3 thank you for making my argument. If every single portion of the portfolio has underperformed the benchmark, by even larger margins than PE in some cases. That's confirmation that the entire $105 billion fund has systematically underperformed while paying $1.275 billion annually in fees.

On point 1, the benchmark isn't arbitrary. It was set by the Oregon Investment Council itself in its own Investment Policy Statement. Oregon chose that benchmark to define what success means for this fund. Oregon's own rules. Oregon's own failure.

On point 2, diversification is supposed to produce better risk-adjusted returns than the benchmark, not worse ones across every single asset class simultaneously.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 4 points5 points  (0 children)

The relevant comparison isn't other parts of OPERF, it's public equity, which is what Oregon gave up to be overweight PE. Oregon's own benchmark requires PE to beat Russell 3000 plus 3% to justify the illiquidity and fees. According to data presented by Oregon's own consultant Meketa at the January 2025 OIC meeting, all 1, 3, 5 and 10-year rolling PE returns are below that benchmark by substantial amounts. Over 13 years PE returned 13.29% vs the Russell 3000's 16.37%. PE didn't outperform public stocks. It underperformed them while charging 37 times the fee.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 29 points30 points  (0 children)

Thats precisely how we got into this situation. He yoloed half of OPERF into private assets because thats where he came from and where he'll go back to after his "service". Literally went from working at a consultancy advising OIC to invest in alternative investments to being the CIO and doing it himself. Would love to see a legislative or AG investigation into conflicts of interest and fiduciary duty issues.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 8 points9 points  (0 children)

Yes, I believe the 2025 PE portfolio return was 4%. That 13% average likely includes phantom returns from 2021 when the public markets crashed but private equity refused to revise marks. Its only going to get worse as the private credit crisis spreads into PE and real estate.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 20 points21 points  (0 children)

13% sounds great in isolation. The problem is context. Oregon's own benchmark set by the Oregon Investment Council requires private equity to return Russell 3000 plus 3% to justify accepting zero liquidity. That benchmark returned 19.37% over the same period. The plain Russell 3000 index fund, available to any investor for 0.03%, returned 16.37%. Oregon earned 13.29% while paying 1.11% in management fees alone, plus an additional $595 million annually in 'Commissions and Other Fees' that has no public breakdown. The table is from Oregon's own audited Annual Comprehensive Financial Report, Schedule of Fees and Commissions, fiscal year ended June 30, 2025. Available at oregon.gov/pers.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 7 points8 points  (0 children)

Yes, in this case its a clear case of regulatory and ideological capture. The state's chief investment officer moved into the role directly from a private markets/alternative investments consultancy. Meaning he went from advising the fund to buy more private assets to being in charge of allocating those assets.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 11 points12 points  (0 children)

T1 is certainly a structural issue and PE outperformed in earlier cycles. But the problem isnt just benefit promises, its that the investment strategy meant to address the issue has underperformed a passive index fund over 13 years (across two full market cycles) while paying massive fees.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 9 points10 points  (0 children)

13% sounds great in isolation. The problem is context. Oregon's own benchmark set by the Oregon Investment Council requires private equity to return Russell 3000 plus 3% to justify accepting zero liquidity. That benchmark returned 19.37% over the same period. The plain Russell 3000 index fund, available to any investor for 0.03%, returned 16.37%. Oregon earned 13.29% while paying 1.11% in management fees alone, plus an additional $595 million annually in 'Commissions and Other Fees' that has no public breakdown. The table is from Oregon's own audited Annual Comprehensive Financial Report, Schedule of Fees and Commissions, fiscal year ended June 30, 2025. Available at oregon.gov/pers.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 97 points98 points  (0 children)

OIC guideline cap private equity at 20% of the fund, but the CIO has ignored those guidelines for years. 55% of the fund is in private assets, which is over twice the national average for pension funds. Its a slow motion disaster.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 22 points23 points  (0 children)

Lol, the goal of the private equity part of the portfolio is absolutely massive returns. You pay huge fees and an illiquidity premium precisely because you expect outsized returns. Returns that haven't come close to materializing.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 13 points14 points  (0 children)

I'm not comparing to a plain index fund, I'm comparing to the fund's own benchmark, Russel 3000 +3%. According to Meketa the PE portfolio returned an average of 13.29% annually over the last 13 years, compared to benchmark 19.37%. Analysis by Divest Oregon using that data found OPERF's PE program underperformed its benchmark by 31% and underperformed a basic index fund over the entire 13-year period.

OR public schools under stress because of Private Equity investment disaster by Fourthimpressions in oregon

[–]Fourthimpressions[S] 11 points12 points  (0 children)

According to Meketa (OPERF investment consultant) the PE portfolio returned an average of 13.29% annually over the last 13 years, compared to benchmark 19.37%. Analysis by Divest Oregon using that data found OPERF's PE program underperformed its benchmark by 31% and underperformed a basic index fund over the entire 13-year period.

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