Calpers’ Apollo Bet Isn’t Coming Up Aces

The California Public Employees’ Retirement System poured $1.71 billion into Apollo Management last year, more than twice as much as it gave any other private- equity manager, Bloomberg News reported.

The move was a bet on Apollo chief Leon Black’s historical success in distressed investment, but, Bloomberg says, it hasn’t paid off so far.

Apollo, which has posted average annual returns of more than 25 percent in the last two decades, is now struggling to right some of the tottering companies in its portfolio.

One of its private equity holdings, Linens ‘n Things, filed for bankruptcy protection. Another, the real estate group Realogy, is caught between a mountain of debt and a housing slump, while its casino operator, Harrah’s Entertainment, is restructuring debt to stave off default.

“Calpers really swung for the fences these last few years chasing returns,” Jonathan Macey, a Yale professor of corporate finance and securities law, told Bloomberg. “Leon Black has made investors a lot of money, but it’s risky to commit so much to one manager.”

NYT Dealbook refers to a Bloomberg News article detailing Calpers huge investments in Apollo since 2007; $1.71 bil in the funds (2x the largest other PE investment) and $600 mil in stock at $24 bought in a private offering from GS in 2007, now valued approximately $1. Garamendi has been Lt. Governor of California since January 2007. Coincidentally, perhaps, Garamendi was the 1st elected insurance commissioner of California in 1991 and forced the receivership of Fred Carr' Executive Life Insurance as Drexel went tapioca. Garamendi then forced liquidation of ExecLife assets at close to 50% on the dollar to one buyer--Leon Black's Apollo formed secretly with funds from Credit Lyonnais. Block and Apollo made billions and became a huge player the last 18 years(and CL was convicted of breaking US banking laws for the ruse). The BBerg Article explains how CALPERS has invested billions with Apollo and is getting killed in their LBO misadventures. Garamendi, who in the 80's told friends he wanted to be Cal. governor and maybe POTUS, had his career waylaid by the Exec Life fiasco, now is runnning for Cal governor! Black's and Garamendi's careers appear to be almost intertwined, perhaps attached at the hip, er wallet!!! plus ça change, plus c'est la même chose.....

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRcIPl3snIAM&refer=home

Pension ought to be illegal, specially when it is tax money. pay the workers there entire earning every two weeks, let them decide how to invest, save, what ever. keep the taxpayer out of the pension bussiness, it is full of risk. it allows the politicains to shift salaries to public workers over to the next generation. it is genreational theft. when the pension plans fail, the taxpayer has to fund them. it is immoral to make the not yet born pay for these pension which are over the top. these pensions are a trick the politicans use to make the budget look better now, but in the long term, it is simply another Ponzi scheme on the taxpayers.

look what the wage and health pension did to the US auto companies, all backed by the tax payer.

this means some young folks, making minimal wage with no pension is paying taxes for some over bloated over paid state worker that has been retired for decades. this is generational theft. they make promises that they cannot keep, yet someone else has to pay for it,I am sick of this!

we cannot have a balanced budget unless we have a pay as you go funding, pensions promising paymets many decades later are wrong to toss onto the tax payers.

I HATE unions for this, and HATE the politians that back up these corrupt pension schemes. Madoff is in jail, why not these bums?????

http://www.forbes.com/global/1999/1227/0226024a.html
Executive Life
Brigid McMenamin, 12.27.99

Crusading under a banner of rescuing policyholders, an ambitious California insurance commissioner named John Garamendi let New York financier Leon Black and his pals at Crdit Lyonnais grab Executive Life Insurance for a fire-sale price of just over $3 billion in 1991. Far from helping, the deal left policyholders taking a 40% shaving on their claims, while Leon Black reaped an estimated $300 million.

That deal helped derail Garamendi’s run for the California governor’s mansion in 1994. He wound up in a dead-end job at the Interior Department.

Guess where Garamendi is working now? At an investment outfit with strong links to—yes, Leon Black. In April 1998 Los Angeles-based Yucaipa Cos., an investment company that’s had some big deals financed by Black, made Garamendi a partner. Yucaipa is headed by supermarket mogul Ronald Burkle. Black’s Apollo Advisors financed Yucaipa’s 1995 acquisition of Dominick’s Foods and the merger of Ralph’s Grocery Co. with Food 4 Less. Black refuses to talk on the record.

Hard to say just what Garamendi does for Yucaipa. When he took the job, he said he would set up an office in Washington, D.C. To date, Yucaipa has no D.C. office, and Garamendi won’t say what he’s doing other than confirming that he’s a partner.

You may be reading more about Black and Garamendi. Though neither is a defendant, a lawsuit recently filed by Garamendi’s successor, Charles Quackenbush, alleges that Black’s French buddies acquired Executive Life by fraud (FORBES GLOBAL, Dec. 13).

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