At a recent public meeting focused on financial matters, the Oregon Civil Service Retirement Plan Fund, which has around $100 billion in assets, voiced criticism towards the Oregon Department of Treasury. This came after the department sold off $4.5 billion in private equity investments from the fund.
State Treasurer Elizabeth Steiner didn’t mince words in her response. She mentioned that activist Rick Pope was making a pitch for Oregon but expressed uncertainty about how many losses had incurred from the sales, noting that sale prices weren’t publicly available.
“You don’t know—you’re not allowed to disclose what we get specifically,” Steiner stated during the Sept. 3 Oregon Investment Council meeting, which was broadcast live from the Treasury’s Tigard headquarters. In her remarks to a broader audience, she emphasized, “There are things that cannot be legally disclosed to the public.”
For Oregon workers—particularly the 415,000 relying on the pension plan for retirement benefits—it might come as a surprise that while they’re informed about stock and bond returns, they’re left in the dark regarding private equity investments. The Treasury only reports overall return rates for all private equity holdings, which represent over a quarter of the $100 billion fund. For years now, these opaque investments have consistently underperformed compared to benchmarks.
At the meeting, with no clear alternative, attendees had little choice but to accept Steiner’s assurances based on trust.
The Oregon Journalism Project requested public records to substantiate Steiner’s claims but was denied by Treasury staff, referencing an exemption within Oregon’s Public Records Act.
This situation stems from a law enacted decades ago, where lawmakers in all 49 other states successfully advocated for legislation that prevents public disclosure of individual investments and other financial data, claiming it veers into trade secrets.
“Public funds should be open to public scrutiny,” asserted Edward Cidle, a former attorney with the U.S. Securities and Exchange Commission, now involved in investigating pension funds for retirees. “Investment managers often resist public accountability. They want to manage public funds for large fees without facing scrutiny.”
State Senator Mark Gamba (D-Milwaukie) expressed discomfort with the lack of transparency, particularly regarding fees and actual returns, including whether funds generate profits from fossil fuels.
John Russell, the former chairman of Oregon’s Investment Council, echoed concerns over the risks tied to secrecy. “It’s unstable, opaque—it’s problematic. You can’t just ask what private equity companies like TPG are doing with your money. They’re designed to be secretive,” he noted.
Private equity, typically involving financial firms buying private companies using debt, aims to reduce costs and enhance value before selling. Giants like Blackstone, Carlyle Group, and KKR usually charge around 2% annually plus 20% of their profits.
Recent surveys by the Oregon Journalism Project revealed that Oregon is over-invested in private equity, against its own advisors’ guidance, while lagging in stocks and bonds. For instance, it is estimated that PERS could have earned about $1.4 billion if it had adhered to its expert investment recommendations in 2024 alone.
Rex Kim, the Chief Investment Officer of the State Treasury, stood by his strategy regarding private equity. He argued that his team is taking a long-term view, suggesting that private equity would eventually outperform the stock market.
While most Oregonians don’t directly benefit from public pensions, the fund’s performance has a significant impact on the quality of life and future for families, especially as public employers like schools and counties contribute 27 cents out of every dollar to fund it.
If private equity returns continue to lag, Oregon’s 904 public agencies will likely face increased costs to fulfill retiree benefits.
During the September 3rd meeting, renowned investor Howard Marks, co-founder of Oaktree Capital Management, was also questioned by Steiner and the council. He acknowledged that private equity firms had prospered with low interest rates, facilitating cheap borrowing to acquire companies. However, Marks cautioned that those favorable interest rates are behind us.
“I believe the outstanding returns we’ve seen won’t be sustained in the upcoming decade… it’s not a given that this pattern continues,” he remarked, adding, “No one is focused on private equity as much anymore.”
Whether the Oregon Treasury and the Investment Council will decrease the portion of funds invested in private equity remains to be seen. Steiner indicated that they would revisit this topic next year for a comprehensive review.
