What may be most surprising to observers of this heightened focus on fees is that such requests have to be made at all. Shouldn’t pension funds already know how much they are paying in fees to private funds? In fairness to pension funds, private funds have numerous ways of concealing fees. For example, a private equity fund might hide fees through related-party transactions.
It is therefore tempting to see high and hidden private fund fees as simply a deception by private funds on unsuspecting pension funds. While not attempting to justify private funds’ actions, this article, prepared for the 2016 Private Fund Conference at UCLA School of Law, offers a different perspective: high private fund fees are, in part, a result of poor governance by state legislators and pension funds themselves.
Full paper available for download here.