For years, ERISA litigation has increasingly revolved around two magic words:

“Meaningful benchmark.”  The phrase sounds like investment science.

Too often, it isn’t.  It has become a litigation construct that can distract courts from the investment question that actually matters:

Did the fiduciary prudently evaluate the investment, its risks, its costs, its contracts, its asset allocation and the reasonable alternatives available at the time?

Investment professionals don’t start with a lawyer’s search for a single magical benchmark.

They start by understanding what they actually own.

And that distinction becomes enormously important with target-date funds, annuities, private equity, private credit and increasingly complicated collective investment trusts.

The BlackRock Target-Date Cases Show What Went Wrong

Beginning in 2022, essentially parallel lawsuits challenged employers’ use of BlackRock LifePath Index target-date funds.  These were low cost funds.    The theory was straightforward: BlackRock’s funds underperformed several competing target-date families.

The problem was that target-date funds aren’t interchangeable.  One 2040 fund might have roughly 70% in equities while another has 60%.

One may use active management. Another passive management.  One may have substantially greater international exposure. Another may hold more bonds. Their glide paths can be materially different.

Those differences matter enormously because asset allocation can dominate investment results.

Comparing the raw return of Fund A against Fund B therefore doesn’t necessarily tell you whether either investment manager did a good job.

It may primarily tell you that one fund owned more stocks during a bull market.  I believe that BlackRock on a fair basis outperformed in general because of lower fees.

Yet that superficial comparison became the centerpiece of numerous BlackRock lawsuits.

And courts repeatedly threw them out.  Three early BlackRock cases were dismissed with prejudice, with courts rejecting comparisons based on other TDF suites, the S&P Target Date Index and even Sharpe ratios.

By 2024, a litigation survey counted eight of the original eleven BlackRock cases dismissed, with only one motion to dismiss denied and two then pending. Cisco became an especially revealing example.

Plaintiffs amended their complaint repeatedly attempting to solve the comparator problem. In March 2025, the court dismissed the third amended complaint, ending the case at the district-court level.

That’s an expensive lesson.

A bad benchmark can destroy an otherwise interesting fiduciary investigation.

A Target-Date Fund Isn’t Really One Investment

A target-date fund is better understood as an asset-allocation portfolio wrapped inside a single investment vehicle.

Suppose:

2040 Fund A

70% stocks  30% bonds

and

2040 Fund B

60% stocks 40% bonds

If stocks dramatically outperform bonds, Fund A should outperform Fund B even if Fund B’s underlying managers actually produced superior risk-adjusted investment results.

Calling Fund A’s higher return proof of superior fiduciary prudence is therefore potentially nonsense.

The correct analysis starts by decomposing the portfolio.

What percentage was allocated to equities?

What percentage to fixed income?

What percentage internationally?

What were the underlying exposures?

How did those allocations change?

What risks were being taken?

What did the underlying managers contribute after controlling for those exposures?

Only then can you intelligently discuss performance.

The DOL Has Now Effectively Acknowledged the Problem

This isn’t merely theoretical anymore.

The Department of Labor’s March 2026 proposed investment-fiduciary regulation defines a meaningful benchmark as an investment, strategy, index or comparator having similar:

mandates, strategies, objectives and risks.

Even more importantly, DOL specifically addresses target-date funds.

Its proposal explains that a fiduciary may use a custom composite benchmark blending broad market indexes according to the TDF’s actual asset allocation.

That is much closer to how an investment professional should approach the problem.

In other words:

The benchmark should follow the investment. The investment shouldn’t be squeezed into whatever benchmark makes a lawyer’s complaint work.

Market Timing Disguised as Benchmarking

There is another danger.

Select a comparator after observing which TDF performed best and you may simply be engaging in hindsight market timing.

Imagine stocks outperform bonds for five years.

A lawyer searches the TDF universe and identifies another fund with superior returns.

But suppose that “superior” fund simply maintained a substantially larger equity allocation.

The complaint effectively argues:

The fiduciary should have known five years earlier that stocks were going to outperform bonds and selected the TDF positioned to benefit from that outcome.

That’s not necessarily evidence of imprudence.

It’s hindsight.

The CMFG court identified essentially this problem, rejecting comparisons between BlackRock LifePath and TDF families having materially different investment strategies and management approaches.

Now Add Private Equity

This problem becomes far worse when Wall Street puts private assets inside target-date funds.

A hypothetical 2040 fund might contain:

55% public equities
25% bonds
10% private equity
5% private credit
5% real estate

Now find me the magical index.

There isn’t one.

Private equity doesn’t even produce a continuously observable market price comparable to publicly traded stocks.

Its reported volatility and correlations can be affected by appraisal-based valuations and infrequent marks.

So simply comparing this fund against Vanguard’s or BlackRock’s conventional 2040 fund can become economically misleading.

The DOL’s own 2026 proposal implicitly recognizes this difficulty. For an asset-allocation investment containing private equity, DOL discusses combining public-market indexes with methodologies commonly used for the private-equity component, including IRR and public-market-equivalent analysis.

That is a vastly more sophisticated exercise than:

Fund A returned 8.2%.

Fund B returned 7.6%.

Therefore Fund B was imprudent.

Annuities Expose the Absurdity Even More Clearly

The benchmark obsession becomes especially problematic with fixed annuities.

A general-account fixed annuity isn’t a bond fund.  It isn’t a synthetic stable-value fund.

It isn’t a Treasury bill. It is fundamentally an insurance-company contractual promise.

The participant exchanges assets for an obligation of an insurer subject to contractual provisions governing such things as:  crediting rates, withdrawals, surrender provisions, market-value adjustments, liquidity, transfer restrictions, investment guidelines, termination rights, and ultimately the insurer’s creditworthiness.

Trying to find a Bloomberg index that magically captures those contractual characteristics misses the investment.  As I have argued previously:

Fixed annuities have comparables. They don’t necessarily have benchmarks.

The obvious question isn’t: What index perfectly tracks this contract?

It is:  What were comparable insurers willing to pay for reasonably comparable contracts at the same time?

If Insurer A offered 2.25% and equally or more creditworthy Insurer B offered 4.25% on reasonably comparable terms, that’s economically important evidence.

You don’t need to invent an index to recognize it.

Prohibited Transactions Make the Benchmark Distraction Particularly Dangerous

This becomes even more important after Cunningham v. Cornell.

Suppose an affiliated insurer, asset manager, recordkeeper or other party in interest is involved in an investment arrangement.

The first question shouldn’t necessarily be:

Did this product underperform its benchmark?

The questions may instead include:

Who received compensation?

Was the provider a party in interest?

What transaction occurred?

What exemption supposedly permitted it?

Were the exemption’s conditions satisfied?

What did the contract actually say?

What alternatives were available?

What fees were embedded inside the structure?

Those are transaction and fiduciary-process questions.

Performance can matter enormously for damages and prudence.

But a prohibited transaction doesn’t magically become permissible because somebody finds an index that the product happened to outperform.

And Guess Which Products Are Hardest to Benchmark?

There is an uncomfortable pattern.

The products increasingly being pushed into retirement plans are precisely the products that are hardest to evaluate using conventional public-market benchmarks:

Private equity.

Private credit.

Insurance-company general accounts.

Separate-account annuities.

Lifetime-income products.

Private real estate.

Multi-asset CITs containing combinations of them.

That’s not a reason fiduciaries should receive less scrutiny.

It’s a reason they require more sophisticated scrutiny.

The Contract May Be More Important Than Morningstar

An attorney can download performance data in minutes.

Reading a 70-page insurance contract is harder.

Obtaining an LPA is harder.

Understanding a CIT declaration is harder.

Reconstructing embedded fees is harder.

Analyzing surrender provisions is harder.

Evaluating insurer credit risk is harder.

Determining whether investment guidelines actually constrain an insurer is harder.

Calculating asset-allocation-adjusted performance is harder.

And hiring somebody who understands these things costs money.

But ERISA isn’t supposed to become:

Whatever can be downloaded cheaply from Morningstar is actionable; everything requiring investment expertise gets ignored.

That turns litigation economics into fiduciary law.

The Better Plaintiff Playbook

Instead of beginning an ERISA investment case by asking “What benchmark underperformed?”, begin with the investment itself.

Question	Superficial approach	Investment-professional approach
TDF performance	Compare 2040 vs. 2040	Normalize asset allocation and glide path
Active management	Compare total return	Separate allocation from manager contribution
Private equity	Compare reported return	PME + cash flows + valuation + fees
Private credit	Compare yield	Credit quality + leverage + liquidity + defaults + fees
Fixed annuity	Find an index	Compare contemporaneous competing contracts
Insurance risk	Use stated return	Examine insurer credit + contract protections
CIT	Compare NAV	Examine underlying holdings and governing documents
Affiliated product	Compare performance	Start with transaction, compensation and exemption
Lifetime income	Compare payout	Examine guarantee, portability, liquidity and downgrade provisions
Fiduciary process	Look at outcome	Examine what fiduciaries actually knew and considered

That is due diligence.

The Irony

Wall Street spent years arguing that retirement investments were too complicated to judge using simplistic comparisons.

On that point, Wall Street was often correct.  But that shouldn’t produce the conclusion:

Therefore complicated products cannot be challenged.  It should produce exactly the opposite conclusion:

Complicated products require complicated due diligence.

And DOL’s proposed rule makes another important point: when an investment is sufficiently complex, the fiduciary must determine whether it actually possesses the knowledge and experience necessary to evaluate it—or whether qualified investment assistance is required.

That principle should apply to litigation too.

Stop Litigating Investments Like Lawyers. Analyze Them Like Investors.

The lesson of the BlackRock target-date litigation shouldn’t be that ERISA investment cases are dead.   The lesson should be that superficial performance lawsuits are bad investment analysis.

A target-date fund isn’t merely its return.  An annuity isn’t merely its crediting rate.

Private equity isn’t merely its reported IRR.  A CIT isn’t merely its NAV.

And an affiliated financial product isn’t cleansed of a potential prohibited transaction because somebody can produce a favorable performance chart.

The next generation of ERISA cases should move beyond the Wall Street-lawyer obsession with finding one magical “meaningful benchmark.”    “the wave of BlackRock LifePath cases overwhelmingly failed, largely demonstrating the danger of comparator-driven pleading.”

Start with:  the assets, the allocation, the contract, the fees, the liquidity, the credit risk, the conflicts, the parties in interest, the available alternatives, and the fiduciary’s actual decision-making process.

Then analyze performance. Because sometimes the most misleading benchmark of all is the one that makes a complicated investment look simple.

Appendix: Intel, the Eleventh Circuit and Wall Street’s “Meaningful Benchmark” Catch-22

The misleading-benchmark problem is now squarely before the Supreme Court—and a brand-new Eleventh Circuit decision shows why the Court should be very careful about turning the phrase “meaningful benchmark” into a universal pleading requirement.

In Anderson v. Intel Corporation Investment Policy Committee, the Supreme Court will decide whether an ERISA plaintiff alleging imprudent investment based on underperformance must plead a “meaningful benchmark.”

Intel participants challenged portfolios containing substantial allocations to hedge funds and private equity, alleging high fees, unusual risks and poor performance. The Ninth Circuit nevertheless affirmed dismissal because plaintiffs had not supplied sufficiently comparable benchmarks. The Supreme Court granted review in January 2026.

The Problem: Sometimes the Differences ARE the Case

On August 18, the Eleventh Circuit provided an important counterweight.

In Johnson v. Russell Investments Trust Co., involving Royal Caribbean’s replacement of Vanguard target-date funds with Russell target-date funds, the district court had demanded essentially an apples-to-apples comparator—another TDF with sufficiently similar strategy and risk characteristics.

The Eleventh Circuit rejected making that requirement dispositive.

Its key observation:

“An ERISA plaintiff need not identify an apples-to-apples comparison to establish objective imprudence in every case.”

Why?

Because the plaintiff argued that the very characteristics distinguishing the Russell funds from other TDFs were themselves what made Russell imprudent.

Requiring another investment possessing those same allegedly imprudent characteristics creates a logical trap.

That Is Exactly the Problem With Intel

Consider the Intel allegations.   Suppose Intel’s portfolios really were unusual because they contained substantially more:

private equity, hedge funds, illiquid investments, high fees, and other alternative strategies.

Then requiring plaintiffs to locate another retirement portfolio with essentially the same unusual combination of risks and strategies before they can challenge Intel produces an absurd result:

The more unusual the fiduciary’s investment strategy becomes, the harder it becomes to sue the fiduciary because fewer comparable investments exist.

That turns ERISA prudence upside down.

Wall Street’s Benchmark Catch-22

The argument can become:

Step 1: Create an unusual investment.

Step 2: Add private equity, private credit, hedge funds, annuities or other difficult-to-value assets.

Step 3: Give it a bespoke asset allocation.

Step 4: Make conventional comparisons increasingly difficult.

Step 5: When participants sue, demand an investment with essentially identical characteristics.

Step 6: Argue that no “meaningful benchmark” exists.

Step 7: Dismiss the case.

That is not investment analysis.

It is potentially a complexity safe harbor.

But This Doesn’t Mean Any Benchmark Will Do

There is an important distinction.

The Eleventh Circuit isn’t saying that lawyers should be free to compare any target-date fund against any other target-date fund.

That would create the opposite problem.

As the Eleventh Circuit itself previously observed in Pizarro, “target date funds are not all created equal.” A more equity-heavy TDF will tend to outperform a conservative TDF during a strong equity market, while the relative results can reverse during a downturn.

That supports the investment-professional criticism of many TDF lawsuits.

If:

Fund A = 70% equities / 30% bonds

and

Fund B = 60% equities / 40% bonds,

and equities boom, Fund A’s higher return doesn’t prove Fund B was imprudent.

The plaintiff may simply be using hindsight to say:

The fiduciary should have known stocks were going to outperform bonds.

That’s market timing disguised as benchmarking.

Two Very Different Cases

This distinction is crucial:

Case theory	Proper benchmark treatment
“Fund A was imprudent because Fund B returned more.”	Demand a genuinely meaningful comparison
Different TDF asset allocations	Normalize for asset allocation/glide path
Active vs. passive management	Separate allocation effect from manager effect
Private equity underperformed	PME and appropriate economic analysis
Fixed annuity paid too little	Contemporaneous comparable contracts may matter more than an index
Excessive fees	Compare services, economics and market alternatives
Excessive illiquidity	Analyze liquidity itself
Excessive private-assets allocation	Analyze the allocation and risks
Contract contains dangerous restrictions	Read the contract
Conflicted/affiliated transaction	Analyze parties, compensation and applicable exemptions
Strategy is itself allegedly imprudent	An identical comparator may defeat the point

The mistake is turning “meaningful benchmark” from an analytical tool into a legal password.

Sometimes “There Is No Comparable Fund” Is Evidence Worth Investigating

Suppose a fiduciary created a 2040 TDF containing:

50% public equities
20% bonds
10% private equity
10% private credit
5% real estate
5% annuity contracts.

A court could ask:

Where is the identical 2040 fund that proves this was imprudent?

But perhaps there isn’t one.

And that might be precisely why the investment deserves greater scrutiny.

The real questions become:

Why did the fiduciary depart from conventional allocations?

What additional return was expected for the additional risk?

What liquidity was sacrificed?

What fees were added?

How were private assets valued?

What leverage existed underneath the investments?

What did the contracts say?

Were affiliates involved?

What alternatives were considered?

What happened to diversification after looking through the underlying holdings?

Those are investment questions, not simply benchmark questions.

Intel Could Determine Whether Complexity Becomes Its Own Defense

The stakes in Intel therefore extend well beyond one company’s retirement plans.

The Supreme Court essentially has three choices.

It could allow superficial comparisons, encouraging more lawsuits claiming that one TDF was imprudent merely because another TDF with a completely different asset allocation performed better.

That would be bad investment analysis.

At the other extreme, it could impose a rigid apples-to-apples benchmark requirement that makes unusual private-market and alternative-investment strategies increasingly difficult to challenge precisely because nothing sufficiently identical exists.

That could be even worse.

Or the Court could recognize the economically sensible middle ground now highlighted by the Eleventh Circuit:

A meaningful comparator may be necessary when the inference of imprudence depends upon comparative performance. But an identical comparator should not be required when the allegedly imprudent characteristics of the investment themselves are the reason no identical prudent comparator exists.

That distinction matters enormously as Wall Street pushes private equity, private credit, annuities, real estate and other opaque products deeper into 401(k) target-date funds.

Show Me What the Plan Actually Owned

The debate ultimately comes down to two approaches.

Wall Street litigation approach:

Show me your benchmark.

Investment-professional approach:

Show me what the plan actually owned.

Then examine:

asset allocation, fees, contracts, leverage, liquidity, valuation methodology, conflicts, parties in interest, alternatives and fiduciary process.

After understanding those things, determine the appropriate method for evaluating performance.

The Eleventh Circuit’s new decision gets an important part of this right:

Sometimes the characteristics making two investments different are precisely the characteristics the lawsuit should be examining.

That is the issue the Supreme Court should keep front and center in Intel.

Otherwise “meaningful benchmark” risks becoming the ultimate Wall Street Catch-22:

The stranger, more complicated and less transparent the investment, the harder it becomes to find an identical comparator—and therefore the harder it becomes to challenge.

A benchmark should help courts understand an investment.

It should not protect an investment from being understood.

https://www.napa-net.org/news/2026/8/eleventh-circuit-erisa-plaintiffs-dont-always-need-a-meaningful-benchmark/

The Private Equity Business Model Depends on Secrecy, Fake Benchmarks, and Fiduciary Illusions

Fixed Annuities Have Comparables. They Do Not Have Benchmarks.

The Supreme Court’s Intel Case is About Secrecy, Fake Benchmarks, and Fiduciary Illusions

Target Date Benchmarks – ChatGPT

THE CONTRACTS PRIVATE EQUITY DOESN’T WANT 401(k) PARTICIPANTS TO SEE

https://commonsense401kproject.com/2026/08/14/sec-mutual-fund-standards-are-slipping-but-not-fast-enough-for-private-equity-which-is-turni https://commonsense401kproject.com/2026/08/11/who-regulates-your-401k-cit-blackrock-goldman-prudential-and-lincoln-lead-back-to-las-vegas/

Annuities: Who Is Your Regulator—and Does Your 401(k) Fiduciary Even Know?

Private equity doesn’t need to censor professors. It has something better: billions in endowment money, billionaire donors, university trustees, business-school influence, proprietary research data—and jobs everyone wants.

Private equity has figured out American academia.   I dig deep into the Sports end at https://commonsense401kproject.com/2026/08/18/want-a-national-championship-rent-a-billionaire/

You don’t have to control what professors say if you can help control the economic ecosystem in which they say it.

America’s universities have spent decades pouring endowment and pension money into private equity. Then the relationship metastasized.

Private-equity billionaires became: Trustees.  Mega-donors.  Investment-committee members.  Business-school advisers.  Sponsors of research centers. Gatekeepers to proprietary data. Employers of the students universities desperately want placed in lucrative jobs.

Nobody has to tell the professor:

Don’t criticize private equity.

The university’s financial structure delivers the message.

Marc Rowan: When the Donor Starts Acting Like the Boss

Apollo CEO Marc Rowan provides an extraordinary case study.

Rowan isn’t merely a Penn alumnus. He gave $50 million to Wharton and chairs Wharton’s Board of Advisors.

Then came the Gaza controversy.

Rowan urged Penn alumni to “close their checkbooks” and became a major force pushing for changes at Penn. Faculty and the AAUP warned that donor pressure was crossing the line into academic freedom and shared governance.

Whatever one’s views about Gaza, Israel, antisemitism or the campus protests, consider the power relationship.

A billionaire threatens the money.

The university listens. That’s not how academic freedom is supposed to work.

And Rowan isn’t simply any billionaire. He runs Apollo, one of the world’s most powerful alternative-investment companies.

Then Professors Took On Apollo

The story became even more extraordinary in 2026.

The AFT and AAUP demanded an SEC investigation of Apollo concerning disclosures about contacts between Jeffrey Epstein and Apollo executives including Rowan and Leon Black.

Rowan wasn’t merely demanding that Penn fight antisemitism. After helping lead the donor revolt that toppled Penn’s president, the Apollo CEO circulated questions asking whether trustees should close academic departments, change faculty qualifications, alter instruction and discipline faculty over viewpoints. Penn’s AAUP chapter called it what private-equity professionals themselves would recognize immediately: a “hostile takeover” of the university’s core operations.

And the takeover attempt came amid an escalating battle over Israel and Gaza. Penn faculty said colleagues criticizing Israeli government policy were subjected to systematic harassment, while administrators restricted Palestine-related teach-ins, protests and educational events. National AAUP specifically warned that criticism of Israel was being conflated with antisemitism.

That’s where Rowan’s private-equity background becomes relevant. Apollo’s CEO wasn’t behaving like an ordinary alumnus writing an angry letter. He was behaving like an activist owner: change management, change governance, examine the workforce, reconsider underperforming departments and impose new operating rules. The problem is that a university isn’t an Apollo portfolio company—and professors aren’t employees of Marc Rowan.

There’s an even stronger national example that would broaden this beyond Rowan. Just this month, the Guardian reported that the University of Minnesota paid historian Raz Segal $250,000 after withdrawing its offer for him to lead its Center for Holocaust and Genocide Studies. Segal had called Israel’s Gaza campaign a “textbook case of genocide.” Public-record emails showed donor pressure, including warnings that pledges and fundraising could disappear if his appointment went ahead. The university settlement did not admit wrongdoing.

https://www.theguardian.com/us-news/ng-interactive/2026/aug/06/professor-israel-gaza-university-of-minnesota?utm_source=chatgpt.com    Maria LaHood

Director of the Center for Holocaust and Genocide Studies   Center for Jewish Studies, warned a university official that the Jewish Community Relations Council (JCRC) of Minnesota and the Dakotas, a group that claims to represent “the public affairs voice of the Jewish community”, was planning to coordinate a “volley” of donor objections,  Marion Rarick, a Republican 

The irony is difficult to miss. American academics increasingly find their freedom dependent upon institutions whose donors, trustees and pension systems are deeply intertwined with private capital. At Minnesota, organized donor pressure helped derail the appointment of a Jewish Israeli genocide scholar who criticized Israel’s conduct in Gaza. At the same time, Minnesota teachers themselves supply billions of dollars to the private-market industry through a pension portfolio allocating more than one-fifth of its assets to private markets. The professors supply the capital. Wall Street collects the fees. Donors gain influence. And the professor who says the wrong thing can discover just how fragile academic independence really is.

https://nypost.com/2024/08/10/us-news/teachers-minn-pension-fund-under-tim-walz-cooking-the-books-by-vastly-underreporting-madoff-miracle/       https://commonsense401kproject.com/2026/04/17/apollo-divestment-case-for-jeffrey-epstein-ties-stronger-after-wyden-letter/

AAUP says its members’ retirement systems have at least $27.5 billion committed to Apollo.

Read that twice.  Professors’ retirement money helps capitalize Apollo.

Apollo collects fees and profits.  Those profits help create enormous personal fortunes.

Those fortunes create mega-donors.

Those mega-donors gain extraordinary access to universities.

And then the professors’ own union finds itself asking federal regulators to investigate the company.

Academia isn’t merely under private equity’s thumb.

In many cases, academia is helping finance the thumb.

Look Who Is Sitting in the Boardroom

Rowan isn’t some bizarre exception.

Private-equity and private-capital executives are scattered throughout the governance structure of America’s elite universities.

University	PE/private-capital figure	University role	Financial connection
Penn/Wharton	Marc Rowan	Chair, Wharton Board of Advisors	Apollo
Stanford	José Feliciano	Trustee	Clearlake Capital
Stanford	James Coulter	Trustee	TPG
Columbia	Alisa Amarosa Wood	Trustee	KKR
Columbia	Jonathan Lavine	Former trustee/chair	Bain Capital
NYU	Joseph Landy	Trustee	Warburg Pincus
NYU	Gregorio Napoleone	Trustee	Stirling Square
NYU	Luiz Fraga	Trustee	Gávea
Northwestern	Du Chai	Trustee	Horsley Bridge
Northwestern	J. Landis Martin	Former board chair	Platte River Equity
Harvard	David Rubenstein	Former Corporation member	Carlyle
MIT	Joseph Broshy	Corporation member	Healthcare PE

These aren’t struggling community colleges looking for somebody to write a $50,000 check.

These are institutions that help determine who becomes America’s economists, financiers, regulators, journalists and political leaders.

And this is only a preliminary list.

Private equity didn’t just get a seat at the table.

It increasingly helps populate the table.

The Business Schools Can Look Like PE Farm Teams

University boards are only the beginning.

Northwestern Kellogg has maintained a Private Equity Advisory Council populated by executives associated with Blackstone, Warburg Pincus, Thoma Bravo, Ares, Partners Group, HIG, Riverside and other private-market firms.

Other elite business schools have built similarly intimate relationships with private capital.

There’s an obvious justification.

Students want private-equity jobs.

Schools want their students to get those jobs.

PE firms want access to elite graduates.

Successful graduates become wealthy alumni.

Wealthy alumni become donors.

Donors become trustees.

Trustees help govern universities.

It’s a beautiful circle.

For private equity.

The obvious question is where the counterweight is.

Where is the Private Equity Skeptics Advisory Council?

Where are the institutional seats for people examining whether PE’s fees, leverage, valuations and claimed diversification benefits actually hold up?

Apparently those aren’t quite as useful for MBA placement statistics.

Even the Academic Data Can Come Through the Industry

This problem gets deeper.

Researchers studying Microsoft don’t need Bill Gates to give them Microsoft’s stock price.

Private equity is different.

Its funds are private.

Its underlying companies are private.

Its contracts are private.

Its valuations are largely private.

Its fees can be extraordinarily difficult for outsiders to reconstruct.

Academic researchers therefore often depend upon proprietary databases and cooperation from institutional investors and industry participants.

UNC’s Private Equity Research Consortium, for example, has described itself as a collaboration between academics and industry professionals and historically facilitated researcher access to Burgiss private-equity data.

Important academic PE research has been produced from institutional datasets like these.

That doesn’t make the research wrong.

But academia ought to recognize the obvious problem:

If the industry controls much of the information, the industry possesses enormous power over the research agenda.

Researchers can investigate the data they can obtain.

The secrets stay secret.

Where Were America’s PE Critics?

For years, Jeffrey Hooke at Johns Hopkins seemed remarkably lonely.

Hooke repeatedly challenged private-equity performance claims, enormous fees and institutional investors’ fascination with alternatives.

Oxford’s Ludovic Phalippou became another major critic.

Notice something?

Oxford.

Not Harvard.

Not Wharton.

Not Stanford.

Not Columbia.

Not Chicago.

That doesn’t prove American professors were silenced.

It raises a better question:

Why did an industry controlling trillions of dollars generate so little sustained criticism from the American academic institutions sitting closest to Wall Street?

Only recently has the academic opposition begun getting louder.

Scholars including Jill Fisch Clayton and Elisabeth de Fontenay have challenged the rush to put private equity into ordinary workers’ 401(k)s.

Others are questioning private credit, valuations, fees and the supposed diversification miracle of private assets.

Good.

But where was this skepticism when institutional investors were shoveling trillions into the industry?

Nobody Needs to Bribe the Professor

This is where defenders of the system will deliberately misunderstand the argument.

They’ll say:

“Show me the professor Marc Rowan paid to change a research paper.”

That’s not how sophisticated institutional capture works.

Imagine you’re a 35-year-old finance professor.

Your university endowment has billions in alternatives.

PE billionaires sit on the university board.

PE executives donate enormous sums.

Your business school wants relationships with Apollo, KKR, Blackstone and Carlyle.

Your students desperately want jobs at those firms.

Your research may depend on private-market data.

Your dean wants successful alumni.

And those successful PE alumni may someday write eight-figure checks to the university.

Now choose your research agenda:

“Private Equity Improves Portfolio Diversification.”

or

“Private Equity Returns Are Inflated by Leverage, Valuation Smoothing, Bad Benchmarks and Hidden Fees.”

Nobody needs to threaten you.

Nobody needs to buy you.

Nobody needs to censor you.

You can read the room.

Universities Police $25,000 Conflicts While Ignoring $50 Million Ones

This may be academia’s greatest hypocrisy.

Universities obsess over professors’ conflicts.

Take a modest corporate research grant and disclosure rules appear.

Consult for an outside company and forms must be completed.

Own shares in a company you’re researching and everybody properly worries about independence.

But what happens when the conflict moves upstairs?

A billionaire gives $50 million.

His industry manages university assets.

Executives from the industry sit on boards and advisory councils.

The business school cultivates their companies.

The industry’s databases support academic research.

Apparently that isn’t a conflict.

That’s philanthropy.

Private Equity Doesn’t Need to Own the University

It has developed something more efficient.

Private equity can simultaneously be:

The university’s investment manager.

The university’s investment.

The university’s donor.

The university’s trustee.

The business school’s adviser.

The student’s dream employer.

The researcher’s data source.

And increasingly:

A political force demanding changes in university governance.

Every individual relationship can be defended.

Put them together and you get something that starts looking remarkably like institutional capture.

The AAUP-Apollo Fight Exposes the Whole System

That is what makes the AAUP confrontation with Apollo so important.

The organization devoted to defending professors’ academic freedom is challenging a company whose CEO is simultaneously one of America’s most powerful university donors.

Meanwhile, the professors’ own retirement savings help provide billions of dollars of capital to Apollo.

You could hardly design a better illustration of the problem.

Academia didn’t wake up one morning and discover private equity had taken over.

Academia sold it the keys.

First came the endowment investments.

Then the private-equity managers.

Then the billionaire donations.

Then the trustees.

Then the advisory councils.

Then the research relationships.

Then the political influence.

Now universities are discovering something they should have learned long ago:

When somebody supplies enough of the money, eventually they expect a say.

Private equity loves to preach accountability when it buys a company.

Perhaps America’s universities should try some on their own campuses.

Disclose the PE trustees.

Disclose the PE donations.

Disclose the PE managers.

Disclose the research relationships.

Disclose the proprietary-data arrangements.

And most importantly:

Stop pretending a $50 million donor presents less of an academic conflict than a professor with a $25,000 consulting contract.

Private equity didn’t have to buy the Ivory Tower.

Academia put itself up for sale.

Private Equity, NIL and Public Pensions Are Turning College Sports Into the Billionaires’ Fantasy League

For more than a century, college sports had a fairly simple hierarchy.

Alabama was Alabama. Ohio State was Ohio State. Michigan was Michigan.

And Indiana football was Indiana football.

Then college sports discovered something more powerful than tradition:

Money that can buy a roster.

Indiana may be the perfect case study.

Mark Cuban had never been a major Indiana athletics donor. Then Curt Cignetti arrived, started winning, and convinced Cuban that additional money could make a difference.

When Indiana needed more money to land quarterback Fernando Mendoza from Cal, Cuban says athletic director Scott Dolson told him what was needed.

Cuban essentially said:

I’ll put up the money.

Mendoza reportedly went from about $1.6 million at Cal to $2.6 million at Indiana. He won the Heisman Trophy. Indiana went undefeated and won the national championship. Mendoza then became the first pick in the NFL draft.

Cuban subsequently put in more money.

That’s not old-fashioned alumni philanthropy.

That’s something much closer to renting a football team.

You Don’t Have to Own the University

Suppose you’re worth $10 billion.

You can’t buy Indiana University.

You can’t buy Michigan.

You can’t buy Oregon.

But you don’t need to.

If the university and television contracts already pay for the stadium, athletic department, coaches and infrastructure, you only need to provide the marginal dollars that separate an average roster from a championship roster.

That number suddenly looks surprisingly affordable.

A recent survey found the average Power-conference football roster now costs more than $20 million. Miami was reportedly above $40 million, while many schools supplement their revenue-sharing money with another $3 million to $5 million from booster-funded NIL collectives.

For a billionaire, that’s pocket change.

Spend $20 million a year for three years and you’ve spent $60 million.

For someone worth $10 billion, that’s 0.6% of his fortune.

An NFL franchise might cost $8 billion.

A college football fantasy team might cost $20 million a year.

Which sounds like more fun?

Indiana Is Not an Outlier

Look around college sports.

Phil Knight and Oregon.

Larry Ellison and Stephen Ross at Michigan.

Cody Campbell at Texas Tech.

Ryan Smith and the BYU basketball ecosystem.

Tilman Fertitta at Houston.

The Tyson and Jones families at Arkansas.

David Booth at Kansas.

Mat and Justin Ishbia at Michigan State.

Paul Tudor Jones at Virginia.

Anthony Pritzker at UCLA.

David Rubenstein and the private-money ecosystem surrounding Duke.

These aren’t boosters buying everyone a steak dinner after the game.

Some are billionaires whose financial resources rival the annual budgets of the universities themselves.

And the new rules allow that wealth to get much closer to the playing field.

Mark Cuban Accidentally Explained the Whole Thing

Cuban has compared the new college-football environment to an NBA salary cap.

He’s right.

But there’s one enormous difference.

The Dallas Mavericks have an owner.

Indiana University doesn’t.

Theoretically.

Yet if one billionaire supplies enough incremental capital to determine which quarterback Indiana can afford, how many transfer-portal players the coach can recruit and how competitive the roster becomes, we should at least ask:

What does ownership really mean?

Cuban doesn’t hire the coach.

He doesn’t own Indiana Athletics.

He doesn’t tell the quarterback which play to run.

That’s important.

But economic control doesn’t always require legal ownership.

If your money makes possible a roster that otherwise couldn’t be purchased, you’ve acquired something extremely valuable:

influence over competitive outcomes.

College Basketball Is Even Easier to Rent

Football requires dozens of expensive players.

Basketball requires five starters.

Kentucky reportedly spent around $22 million constructing its 2025-26 roster, and reports suggested another $20-million-plus roster could follow.

Think about that.

A billionaire doesn’t need to donate $500 million to build a medical school.

He can spend $20 million on basketball players.

For two years.

Maybe win a championship.

Sit courtside.

Become the most popular alumnus on campus.

And move on.

That looks remarkably like renting a professional franchise—without paying the franchise acquisition price.

Now Private Equity Has Discovered the Other Half of the Business

The billionaires can finance the players.

Private capital can monetize everything surrounding them.

The University of Utah has already crossed the line.

Utah created a for-profit company with Otro Capital that manages revenue-producing activities including events, branding, licensing, sponsorships, ticketing and digital media.

Otro gets a percentage of the resulting revenue.

Utah still owns the facilities and controls coaches, recruiting and athletes.

That’s precisely why the structure is so fascinating.

Otro doesn’t have to own the Utah Utes.

It gets access to the economics surrounding the Utes.

The original transaction contemplated potentially hundreds of millions of dollars of outside capital, with reports putting the broader potential commitment as high as $500 million.

This is the private-equity version of renting the team.

Then the Big 12 Called Wall Street

The Big 12 subsequently approved a five-year partnership with RedBird Capital Partners and Weatherford Capital.

The conference gets a $12.5 million capital infusion and commercial-development assistance.

Individual schools can obtain up to $30 million apiece through an optional credit facility.

Importantly, RedBird doesn’t own the conference, its revenues or its governance.

Again:

Why own the team when contracts can give you access to its economics?

As of May, no Big 12 school had publicly confirmed taking the $30 million credit offer.

That restraint may not last forever.

And Guess Who Else Has Discovered College Sports?

Public money.

Elevate launched a $500 million Collegiate Investment Initiative backed initially by Velocity Capital Management and the Texas Permanent School Fund Corporation.

Its purpose is to provide capital for revenue-generating college athletic projects.

Read that again.

A public institutional investment fund is helping capitalize a platform designed to monetize college athletics.

Meanwhile, the Big Ten considered something even larger.

UC Investments—connected to the University of California retirement and investment system—proposed putting $2.4 billion into a new Big Ten commercial entity in exchange for a 10% interest in Big Ten Enterprises, which would house media-rights and sponsorship economics.

Michigan and USC opposed the transaction and the proposal was paused.

But the significance isn’t whether that particular deal ultimately closes.

The wall has already been breached.

Follow the Circular Money Trail

Here’s where college sports starts looking a lot like the rest of modern finance.

Public/institutional money

↓

Private-equity and investment managers

↓

Billionaire fortunes

↓

College boosters and private-capital vehicles

↓

Players, coaches and athletic departments

↓

Winning

↓

Tickets, television, sponsorships and gambling

↓

More valuable college-sports cash flows

↓

Private investment returns

↓

Back to institutional investors

This isn’t the college-sports business most alumni think they’re watching on Saturday afternoon.

Then Add Gambling

This is where regulators should start paying attention.

College games are no longer merely contests between students representing universities.

They are events surrounded by enormous amounts of legal gambling.

And roster information moves betting markets.

A quarterback transfer matters.

An injury matters.

A player’s compensation dispute matters.

A billionaire deciding whether to finance another transfer matters.

If private investors, billionaire boosters, commercial partners, data companies and sportsbooks increasingly surround the same teams, the question isn’t whether any particular participant is doing something improper.

The question is:

Who is watching the conflicts?

The Public-University Problem

The issue gets stranger when the team belongs to a public university.

The taxpayers effectively own the institution.

Students pay tuition.

Fans buy tickets.

Donors finance facilities.

Television networks finance conferences.

Billionaires finance players.

Private capital can finance commercial operations.

And public investment pools can potentially provide capital to the investors.

Who exactly is the principal?

And who is the agent?

That is a governance structure begging for conflicts.

The Billionaire Fantasy League

Maybe we need to stop pretending this is still traditional amateur college athletics.

College football and basketball are evolving toward something genuinely new:

The Billionaire Fantasy League.

Pick your alma mater.

Hire a great coach.

Put $20 million into the roster.

Buy a quarterback.

Bring in transfers.

See if you can win the championship.

If it works, put in another $20 million next year.

Cuban’s experience is almost a perfect demonstration.

Indiana needed a quarterback.

The athletic director had one in mind.

There was a funding gap.

A billionaire wrote the check.

The quarterback won the Heisman.

Indiana won the national championship.

Cuban put in more money.

That may be the greatest booster return on investment in college-football history.

The Next Great College Rivalry May Be Billionaire vs. Billionaire

Michigan–Ohio State used to be about recruiting, coaching and tradition.

Increasingly it is also about:

Whose alumni have more money?   Larry Ellison or Les Wexner?

Whose collective can raise more?

Whose billionaire wants to play?

Whose private-capital partners can generate more revenue?

And whose university is willing to mortgage more of tomorrow’s sports economics to win today?

That last question should concern university trustees.

Because billionaires can walk away.

Players graduate.

Coaches leave.

Private-equity contracts don’t necessarily disappear.

Debt doesn’t disappear.

And revenue-sharing obligations don’t disappear.

The Most Dangerous Sentence in College Sports

It may eventually be:

“We have to do it because everyone else is doing it.”

That’s how arms races work.

Indiana proves that money can rapidly change the competitive hierarchy.

Utah proves private capital can get directly inside the commercial structure of a public university’s athletics operation.

The Big 12 proves conferences will turn to private capital when they can’t keep up with richer competitors.

And the Texas Permanent School Fund and proposed UC/Big Ten transaction show institutional public money can wind up on the investor side of the equation.

College sports isn’t simply being professionalized.

It is being financialized.

The universities may still own the jerseys.

The fans may still sing the fight songs.

But increasingly, somebody else may be financing the players, somebody else financing the athletic department, and somebody else owning a contractual claim on the money those players and fans generate.

Private equity doesn’t have to buy your college football team.

A billionaire can rent the roster.

Wall Street can rent the revenues.

And public money may help finance both sides of the game.

Allison Ball has spent years telling Kentucky taxpayers that ESG creates conflicts for public pension fiduciaries.

Maybe somebody should audit Allison Ball.

Because when you follow the money from Kentucky’s pension funds to KKR, and then from KKR into the State Financial Officers Foundation orbit, the anti-ESG crusade starts looking considerably less principled.   KKR is also a major funder of Data Centers.

Ball isn’t some casual SFOF member.

She was SFOF national vice chair in 2018, national chair in 2019, and is now SFOF’s 2026 Auditor at Large. SFOF itself currently lists Ball in that position.

And the relationship became even more personal.

Meet O.J. Oleka: From Allison Ball’s Office to Running SFOF

O.J. Oleka wasn’t merely another Kentucky Republican who happened to end up at SFOF.

He worked for Allison Ball.

Oleka joined Ball’s Kentucky Treasury staff, served as communications director and was promoted to chief of staff and assistant/deputy state treasurer.

Ball explained the promotion by saying Oleka had spent the previous year shaping the message coming from her office and helping develop its policy goals.

SFOF liked him too.

While working in Ball’s Treasury, Oleka was named SFOF’s 2018 State Staffer of the Year.

He later joined SFOF’s board.

Then Oleka ran for Kentucky state treasurer in 2023.

Guess who endorsed him?

Allison Ball.

Oleka lost the Republican primary to Mark Metcalf.

But politics provided another landing spot.

In October 2024, Oleka became CEO of SFOF.

So the organizational family tree isn’t complicated:

Allison Ball → Kentucky Treasury → O.J. Oleka → SFOF.

Ball herself remains a SFOF officer.

And the relationship remains remarkably close. In April 2026, Ball and Oleka appeared together as witnesses before the House Oversight Committee at a hearing on fraud prevention.

You couldn’t invent a better illustration of the revolving door.

Now Add KKR

Here is where this gets interesting.

KKR has been identified as a former “Friends of SFOF” sponsor.

Think about that.

SFOF became one of the loudest organizations in America attacking Wall Street firms for ESG.

Yet KKR—one of the world’s largest private-equity firms—was itself inside SFOF’s sponsorship ecosystem.

And KKR is hardly an anti-ESG firm.

KKR has been a signatory to the UN Principles for Responsible Investment since 2009 and has embraced sustainability programs, climate initiatives, ESG integration and other commitments designed in part to satisfy institutional investors in Europe and blue states.

So apparently ESG wasn’t inherently disqualifying.

It depended on which Wall Street firm was practicing it.

Ball’s Bigger KKR Problem: Kentucky Teachers

Ball’s hypocrisy becomes much harder to explain when you look at her actual fiduciary responsibilities.

As Kentucky state treasurer, Ball sat on the Kentucky Teachers’ Retirement System Board of Trustees.

She wasn’t commenting on pensions from Fox News.

She was a pension fiduciary.

During Ball’s tenure, Teachers approved major new commitments to KKR, including as much as:

$55.5 million to KKR European Fund V in 2018.

Then:

$40 million to KKR Health Care Strategic Growth Fund II in 2020.

That’s as much as $95.5 million of additional KKR commitments during Ball’s tenure.

I have not found evidence that Ball personally made or seconded those investment motions, so let’s not pretend otherwise.

But she was sitting on the governing board.

And KKR’s ESG credentials weren’t secret.

KKR had already been a UN PRI signatory for nearly a decade when Teachers approved the 2018 commitment.

Apparently that wasn’t an ESG emergency.

Then Kentucky’s Attorney General Put KKR’s Teachers Business Into a Lawsuit

This is where the story becomes extraordinary.

In July 2020, Republican Kentucky Attorney General Daniel Cameron revived the massive Kentucky pension litigation against KKR/Prisma, Blackstone and others.

Cameron didn’t limit his allegations to Kentucky Retirement Systems.

He explicitly brought Kentucky Teachers’ Retirement System into his factual case.

Cameron’s complaint identified approximately:

$79 million of KKR investments at Teachers

and

$69 million of Blackstone investments.

That’s $148 million.

The attorney general alleged that KKR/Prisma and Blackstone had sold alternative investments to both Kentucky pension systems and characterized the products as similarly risky and expensive.

Those were allegations, not judicial findings, and KKR and Blackstone denied wrongdoing.

But think about what happened next.

Ball was sitting on the Teachers board.

Kentucky’s own Republican attorney general had just put Teachers’ KKR and Blackstone relationships into a major pension lawsuit.

And Teachers subsequently approved another KKR commitment.

Yet somewhere as Cameron’s litigation progressed, Teachers essentially disappeared from the surviving case.

The later litigation and proposed settlement became a KPPA/KRS affair.

Where did the Teachers claims go?

That deserves an answer.

And Then Ball Discovered the Dangers of ESG

By 2022, Ball had become one of America’s prominent anti-ESG financial officers.

Ball and Cameron demanded information about ESG practices in Kentucky’s public retirement systems.

Ball argued that pension managers must focus on beneficiaries rather than political objectives.

Excellent principle.

Let’s apply it retroactively.

Where was that aggressive fiduciary scrutiny when Teachers was committing money to KKR?

Where was it after Cameron’s own lawsuit put KKR’s relationship with Teachers under a spotlight?

And why did KKR’s membership in the same ESG universe that SFOF would use against BlackRock apparently cause so little concern?

The obvious comparison is devastating.

BlackRock ESG = fiduciary crisis.   These are primarily low fee low risk investments

KKR ESG = apparently compatible with tens of millions of dollars of Kentucky Teachers commitments.  These are high fee high risk assets with big budgets to give to organizations.

Even more remarkably:

KKR itself was once a sponsor of SFOF.

Did KKR Pay Oleka’s Salary?

We don’t know.

And that distinction matters.

SFOF is a nonprofit organization funded overwhelmingly by contributions. Its 2024 Form 990 reported approximately $2.84 million in contributions out of $2.92 million in total revenue.

Its 2024 return reported about $559,000 in executive compensation.

Oleka didn’t become CEO until late 2024, so the publicly available 2024 Form 990 still principally identifies predecessor Derek Kreifels’s compensation rather than giving us a clean annual Oleka salary figure.

More importantly, SFOF does not publicly disclose every donor.

We know KKR was formerly identified as a SFOF sponsor.

We do not currently have evidence showing that a particular KKR contribution paid a particular dollar of Oleka’s compensation.

That shouldn’t end the inquiry.

It should start it.

Is SFOF Allison Ball’s Political Slush Fund?

“Slush fund” is too strong without evidence that money was diverted or improperly used.

But there is a perfectly legitimate question underneath it:

Has SFOF become a privately financed political infrastructure for elected state financial officers?

Look at the structure.

Private organizations and financial companies fund SFOF.

SFOF provides elected treasurers and auditors with national meetings, policy infrastructure, messaging, networking, media exposure and an organized platform for coordinated campaigns.

Ball rose through SFOF’s leadership while holding statewide office.

Her own senior government aide received an SFOF award while working for her.

That aide later joined SFOF’s board, ran for Ball’s old statewide office with Ball’s endorsement, and ultimately became SFOF’s CEO.

Ball remains an SFOF officer.

And Ball and her former staffer now appear together before Congress—Ball as Kentucky’s elected auditor and Oleka as CEO of the organization in which Ball holds a leadership position.

Maybe everything about that arrangement is perfectly proper.

But taxpayers are entitled to ask:

Who is paying for it?

Follow the Money, Not the ESG Talking Points

The biggest irony is that SFOF says its mission includes protecting taxpayer dollars and responsible financial management.

Fine.

Open the books.

Publish every corporate sponsor and contribution.

Publish sponsorship levels.

Publish payments for conferences attended by elected officials.

Publish travel, lodging and entertainment provided to officials or their staffs.

Publish compensation of senior executives.

Publish communications between sponsors and SFOF officials involving state investments.

And most importantly, disclose whether financial firms sponsoring SFOF were simultaneously seeking or maintaining investment-management business from pension systems overseen by SFOF members.

KKR makes that question impossible to dismiss.

KKR was a SFOF sponsor.

KKR was managing Kentucky pension money.

KKR was being sued by Kentucky’s attorney general over pension investments.

KKR had extensive ESG commitments.

And Allison Ball was simultaneously a Kentucky pension fiduciary and a major SFOF figure.

Yet the political villain somehow became BlackRock.

The $64 Billion Question

This isn’t really an argument about whether ESG is good or bad.

It is about consistency.

If ESG affiliations create an unacceptable fiduciary conflict, apply the standard to KKR.

If UN PRI membership makes BlackRock suspect, apply the standard to KKR.

If financial firms influencing public officials create conflicts, disclose KKR’s SFOF sponsorship.

If pension fiduciaries must put beneficiaries first, explain why Kentucky Teachers continued doing business with KKR while Kentucky’s own attorney general was raising serious allegations concerning KKR’s Kentucky pension business.

And explain why Teachers subsequently disappeared from that litigation.

Allison Ball wants Kentucky taxpayers to believe the big threat to their pensions is ESG.

Maybe Kentucky taxpayers should ask a simpler question:

Who funded the people telling them that—and who got the pension money?

That isn’t left-wing ESG.

That isn’t right-wing anti-ESG.

That’s just following the money.

———————————————————————————–

https://commonsense401kproject.com/2026/07/17/what-judge-wingates-hearing-reveals-kentuckys-hedge-fun

Kentucky’s Data Center Gold Rush: Follow the Power, the Politics, and the Pension Money

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Kentucky Epstein Justice May Update

Many in Congress get donations from firms linked to Jeffrey Epstein – KY Congressman Andy Barr Example

I am a big fan of Jim Watkins’ Active Management Value Ratio (AMVR). https://investsense.com/category/amvr/

Watkins describes AMVR as essentially a cost-benefit test: compare the incremental cost of active management with the incremental risk-adjusted return produced by that active management. His formulation asks two wonderfully simple questions:

1. Did active management produce a positive incremental return?
2. If it did, was that incremental return sufficient to justify the incremental cost?

Watkins calls it persuasive “third grade math.” That simplicity could make AMVR particularly useful in ERISA litigation. Watkins has also presented the concept to the Department of Labor’s ERISA Advisory Council.

But there is a problem.

AMVR works best when the numbers going into it are real.

And an increasing portion of the 401(k) marketplace is moving toward investments where fees, valuations, volatility and even the definition of “return” can become much harder to measure.

The Easy AMVR Case: Active Mutual Fund vs. Index Fund

Take an old-fashioned domestic equity option.

Suppose a plan offers an actively managed large-cap fund such as Fidelity Contrafund when substantially similar market exposure could have been obtained through a low-cost index fund.

That is fertile territory for AMVR.

You have:

Active fund expense
minus
passive alternative expense

compared with:

Active fund risk-adjusted return
minus
passive alternative risk-adjusted return

Both investments are SEC-registered securities. Both have observable market prices. Expenses are disclosed. Returns are calculated using essentially the same accounting framework.

If the fiduciary paid substantially more for active management but received no corresponding incremental benefit, AMVR gives plaintiffs and courts an intuitively understandable way of asking:

What did the participants get for the extra money?

That may be a much more useful question than simply arguing that one fund had a higher expense ratio.

But the 401(k) Litigation Market Has Changed

The problem is that the classic high-fee standalone active mutual fund is becoming less important in the largest plans.

Large plans have spent years replacing expensive standalone active mutual funds with institutional shares, index funds, CITs and target-date funds.

Meanwhile, target-date funds have become the center of gravity of the modern 401(k).

That changes the litigation opportunity.

Instead of asking whether Fidelity Contrafund justified its additional expense over an index fund, the increasingly important question may be whether an actively managed target-date strategy justified its additional cost over a passive target-date strategy.

And that may be one of AMVR’s best applications.

Fidelity Active TDF vs. Fidelity Passive TDF

This is potentially a very clean comparison.

Fidelity operates target-date strategies using active management as well as index-oriented strategies.

The active Fidelity Freedom funds can carry meaningful expenses. For example, Fidelity currently reports a 0.68% gross expense ratio for Fidelity Freedom 2055.

That creates a natural AMVR question:

Did participants actually receive enough incremental risk-adjusted return from the active target-date management to compensate them for its incremental cost?

This is much cleaner than comparing completely unrelated target-date managers.

The closer the comparator, the stronger the economic argument.

Same provider.

Same retirement year.

Similar glidepath objective.

Similar participant population.

But different implementation costs.

That is exactly the kind of comparison AMVR was designed to illuminate.

Vanguard Can Be a Comparator — But Be Careful

A Vanguard target-date fund can also provide a low-cost benchmark.

But plaintiffs should not simply compare a Fidelity 2040 fund with a Vanguard 2040 fund and declare the difference to be active-management value.

Target dates do not guarantee identical portfolios.

One 2040 TDF might hold 60% equities while another holds 70%. They may have different international allocations, duration, small-cap exposure and glidepaths.

Those differences matter.

A better AMVR analysis would decompose the TDF.

For example:

Component	Active TDF	Passive Comparator
U.S. equity	Active funds	Comparable U.S. index
International equity	Active funds	International index
Fixed income	Active bonds	Comparable bond index
Real estate	Active exposure	Appropriate public benchmark
Cash/short-term	Active	Comparable index

Then apply AMVR to the economically relevant components.

That avoids turning AMVR into another crude performance-comparison lawsuit.

Then Come Private Equity, Private Credit and Annuities

This is where things get much more difficult.

The new generation of target-date CITs increasingly can contain investments that don’t have the transparency of ordinary SEC mutual funds.

That includes:

• private equity;
• private credit;
• private real estate;
• fixed annuities;
• lifetime-income contracts; and
• other insurance-company products.

The AMVR equation may still look simple.

The inputs aren’t.

Private Equity: What Is the Actual Cost?

Imagine that a target-date CIT reports approximately 200 basis points of private-equity expenses.

But the actual economic drag—including management fees, carried interest, portfolio-company fees, financing expenses, fund-of-funds expenses and other embedded costs—is closer to 600 basis points.

Which number belongs in AMVR?

Obviously, it should be the economic cost.

But a participant, fiduciary—or plaintiff’s attorney—may not have access to the contracts necessary to calculate it.

That is why I have argued that the underlying contracts are becoming one of the most important documents in 401(k) litigation.

The Contracts Private Equity Doesn’t Want 401(k) Participants to See

The Return Side Can Be Just as Distorted

Private-market valuations create another AMVR problem.

Public stocks are priced continuously.

Private assets generally aren’t.

Appraisal-based and manager-reported valuations can smooth the return series. That can make private assets appear to have lower volatility and lower correlation with public markets than their true economic exposure would suggest.

I recently discussed precisely this problem:

Private Equity’s New 401(k) Sales Pitch: Fake Diversification From Smoothed Numbers

If the risk-adjusted-return calculation uses artificially smoothed volatility, AMVR can inadvertently reward the very accounting convention that makes the investment appear safer.

Garbage risk numbers in can produce a beautiful AMVR number out.

Annuities Create an Even Bigger Problem: The Invisible Expense Ratio

Now consider a fixed annuity.

An insurer may say:

Expense ratio: 0.00%.

That doesn’t mean the insurer works for free.

The insurer earns investment returns on its general-account assets and credits participants a lower contractual rate.

The difference—the spread—is part of the economics of the product.

Yet that spread doesn’t appear as a conventional mutual-fund expense ratio.

I have previously discussed this problem with TIAA Traditional. TIAA’s target-date modeling can present the annuity as having no conventional investment fee even though the insurer economically benefits from the spread between its assets and the rate credited to participants.

So imagine running an AMVR comparison using:

Index bond fund: 5 basis points

versus

Fixed annuity: 0 basis points

The annuity wins before the calculation even starts.

But if the insurer is economically retaining, say, 150–300 basis points of spread, the comparison changes dramatically.

The problem isn’t AMVR.

The problem is defining cost honestly.

AMVR May Therefore Become a Discovery Tool

This is where I think Watkins’ concept could become particularly powerful for plaintiff lawyers.

AMVR doesn’t merely provide a damages calculation.

It tells you what documents you need.

To calculate the numerator and denominator properly for a modern TDF, plaintiffs may need:

Cost documents: LPAs, side letters, annuity contracts, investment-management agreements, carried-interest provisions, underlying fund expenses, insurance spread analyses and affiliated compensation.

Risk documents: valuation policies, appraisal procedures, liquidity restrictions, leverage, insurer credit exposure and internal risk assumptions.

Comparator documents: investment committee analyses showing what passive or lower-cost alternatives were actually considered.

In other words:

AMVR can become a roadmap for discovery.

The fiduciary should be able to answer the question Watkins’ framework raises:

What additional economic benefit did participants receive for every additional dollar they paid?

If defendants cannot answer because they don’t know the real fees, don’t possess the underlying contracts, or relied upon smoothed private-market volatility, that may be more damaging than an unfavorable AMVR calculation.

CITs Make This Problem More Important

This also helps explain why the industry’s movement away from SEC mutual funds toward CIT structures deserves scrutiny.

SEC mutual funds impose comparatively standardized disclosure, valuation and liquidity requirements.

Private-market and insurance products are much harder to squeeze into that framework.

State-regulated CITs potentially provide substantially greater structural flexibility.

That is why I have called the development two roads into your 401(k):

SEC Mutual Fund Standards Are Slipping — But Not Fast Enough for Private Equity, Which Is Turning to State-Regulated CITs

The litigation consequence is important.

Yesterday’s excessive-fee case might have involved:

60-basis-point active mutual fund
vs.
5-basis-point index fund.

Tomorrow’s case could involve:

40-basis-point TDF CIT

that contains an investment supposedly charging:

0 basis points

but whose insurer retains a large spread,

plus private equity supposedly costing:

200 basis points

whose true economic cost may be multiples of the disclosed number.

The fund wrapper looks inexpensive.

The underlying economics may be anything but.

AMVR 2.0: Follow the Economic Cost

That suggests an important refinement when applying AMVR to modern 401(k) litigation.

Don’t merely use the disclosed expense ratio.

Use the total economic cost.

That means asking:

AMVR numerator =

disclosed fees

• embedded fees
• spreads
• carried interest
• underlying fund expenses
• affiliated compensation
• material transaction costs

relative to the appropriate passive or lower-cost alternative.

And the denominator must receive the same scrutiny.

Don’t accept artificially low volatility simply because an asset isn’t marked to market every day.

Risk-adjusted returns should account for economically meaningful differences in:

liquidity, leverage, credit risk, valuation smoothing and asset allocation.

Otherwise the calculation risks comparing transparent market-priced securities against opaque contracts whose apparent stability results partly from the absence of market pricing.

The Litigation Question Is Beautifully Simple

AMVR’s greatest contribution may ultimately be the simplicity of the question it forces fiduciaries to answer:

Participants paid more. What did they get for it?

For an active SEC mutual fund, we can usually calculate the answer.

For an active target-date fund, we can still calculate it, although we may need to control carefully for glidepath and asset allocation.

For a target-date CIT containing private equity, private credit and annuities, however, plaintiffs may first have to determine what participants actually paid and what risks they actually assumed.

That isn’t a weakness of AMVR.

It exposes a much larger weakness in today’s 401(k) marketplace.

The more difficult Wall Street makes it to calculate AMVR, the more important the underlying contracts, valuation methods and hidden compensation become.

And that may point toward the next generation of 401(k) litigation.

Appendix: AMVR 401(k) Litigation Matrix — From Cleanest Case to the Opaque Frontier

AMVR gets more complicated as 401(k) investments move from transparent, market-priced SEC mutual funds toward target-date CITs containing private equity, private credit and insurance contracts.

The key distinction is between reported cost and true economic cost, and between reported risk and true economic risk.

Litigation Scenario	Example	AMVR Difficulty	Fee Transparency	Risk/Return Comparability	Best Comparator	Principal Litigation Issue
1. Active domestic equity mutual fund	Fidelity Contrafund vs. comparable index	1 — Very Easy	Excellent	Excellent	Same-style passive index	Did active management earn enough incremental return to justify incremental fees?
2. Same-manager active vs. passive TDF	Fidelity active Freedom 2040 vs. Fidelity index 2040	2 — Easy	Excellent/Good	Very Good	Same-manager passive TDF	Particularly clean AMVR test because manager, target year and general objective can be closely matched.
3. Different-manager TDFs	Fidelity active 2040 vs. Vanguard 2040	3 — Moderate	Good	Moderate	Low-cost TDF adjusted for allocation	Must control for glidepath, equity allocation, international exposure, duration and other differences before attributing results to active management.
4. TDF containing private equity/private credit	New-generation TDF CIT	4 — Difficult	Poor	Poor	Public-market equivalents plus liquidity/leverage adjustments	Disclosed fees may materially understate total economic costs; reported volatility may be artificially reduced by appraisal-based valuations.
5. TDF containing fixed/lifetime-income annuity	TDF CIT with embedded insurer contract	5 — Very Difficult	Very Poor	Poor	Comparable bonds/stable value plus credit and liquidity adjustments	A reported 0% expense ratio can ignore a potentially substantial insurer spread and contractual restrictions.
6. TDF combining PE + private credit + annuity	State-regulated multi-asset TDF CIT	6 — Litigation Frontier	Potentially Very Poor	Potentially Very Poor	Component-by-component reconstruction	AMVR may require discovery of contracts, LPAs, spreads, valuation methodology, leverage, underlying expenses and affiliated compensation before it can even be calculated properly.

What Plaintiffs Need to Calculate AMVR

AMVR Component	Traditional Mutual Fund	Modern TDF/CIT Problem	Potential Discovery
Management fee	Prospectus	CIT disclosures may be less complete	Trust documents; investment-management agreements
Underlying fund fees	Generally disclosed	Fund-of-funds layering	Underlying fund agreements and expense schedules
Private-equity cost	N/A	Management fees + carry + portfolio/underlying costs	LPAs; side letters; capital-account statements
Private-credit cost	N/A	Management/incentive fees plus leverage and financing costs	LPAs; credit agreements; fund financial statements
Annuity cost	N/A	Spread may not appear as an expense ratio	Insurance contract; investment guidelines; credited-rate methodology
Affiliated compensation	Generally identifiable	Multiple related entities may participate	Affiliate agreements; revenue-sharing records
Return	Daily NAV	Private valuations may be appraisal/manager based	Valuation policies; valuation committee materials
Volatility	Market observed	Smoothing can suppress measured volatility	Unsmoothing analysis; valuation history
Liquidity	Usually daily	Gates, lockups and contract restrictions	Redemption provisions; side letters; annuity termination provisions
Credit risk	Portfolio observable	Insurance-company general-account exposure	Ratings; CDS spreads; statutory filings; downgrade provisions
Benchmark	Straightforward	Private assets may use inappropriate benchmarks	Investment committee and consultant benchmarking materials

The AMVR Litigation Ladder

The progression is important.

Level 1 — The numbers are disclosed.
The fight is over whether the fiduciary paid too much for active management.

Level 2 — The numbers are disclosed, but the portfolios differ.
The fight becomes whether the plaintiff selected a genuinely comparable alternative.

Level 3 — The fees aren’t completely disclosed.
The plaintiff must reconstruct the investment’s total economic cost.

Level 4 — The risk isn’t completely observable.
The plaintiff must adjust for valuation smoothing, leverage, illiquidity and credit exposure.

Level 5 — Neither cost nor risk is readily observable.
The underlying contracts themselves become central evidence.

That last category may produce the most interesting litigation.

A defendant might respond to an excessive-fee allegation by saying:

“The CIT only costs 40 basis points.”

The AMVR response should be:

“Show us everything underneath the 40 basis points.”

A Better AMVR for Modern 401(k)s

For traditional mutual funds:

AMVR = Incremental Active-Management Cost ÷ Incremental Risk-Adjusted Benefit

For modern TDF CIT litigation, the numerator may need to become:

Total Economic Cost =

Management fees

• underlying fund expenses
• carried interest
• insurance spreads
• financing costs
• affiliated compensation
• other embedded economic costs.

And the return side needs adjustment for:

asset allocation + leverage + liquidity + credit risk + valuation smoothing.

That produces an important litigation principle:

You cannot prove that an investment was cheap by hiding its compensation outside the expense ratio, and you cannot prove that it reduced risk by hiding volatility inside appraisal-based valuations.

The Discovery Trap for Defendants

AMVR could therefore create an uncomfortable fork for defendants.

If defendants argue that the sophisticated private-market or insurance investment provided superior value, plaintiffs can ask for the documents necessary to verify that proposition.

Private equity: Produce the LPAs, side letters, carried-interest calculations and underlying expenses.

Private credit: Produce leverage, financing expenses, valuation procedures and affiliated transactions.

Annuities: Produce the actual contract, investment guidelines, credited-rate methodology, termination provisions, insurer portfolio information and spread analysis.

TDF CIT: Produce the trustee agreements, underlying investment contracts, valuation methodology and the investment committee’s analysis comparing the structure against transparent alternatives.

If those documents were never obtained or analyzed by the fiduciary, the case potentially becomes more important than a simple excessive-fee claim.

The question becomes:

How could the fiduciary determine that participants received adequate value for the additional cost and risk if the fiduciary itself never determined what the investment actually cost or how much risk participants were actually assuming?

That is where AMVR potentially moves from a performance metric to a fiduciary-process test.

TIAA’s Target Date Funds Are Built on a Risk Illusion – other firms copying

Ohio removed two trustees over a QED proposal that invested $0. Meanwhile, billions actually flowed to private equity—and the man behind QED headed an organization connecting financial firms with the public officials controlling trillions.

Something has always been backwards about the Ohio STRS scandal.

Economics professor and former national AAUP president Rudy Fichtenbaum and fellow STRS trustee CPA Wade Steen were portrayed as participants in a gigantic scheme involving an obscure startup called QED.  Ohio Attorney General Dave Yost ultimately succeeded in having both removed from the STRS board.  But start with the money.

How much STRS money was actually invested in QED?

$0.

How much did QED pay Fichtenbaum?

Not $1 has been shown.

How much did QED pay Steen?

Not $1 has been shown.

How much did STRS lose investing in QED?

$0.

QED never got the money. Because they never really existed.  Never held $1, never registered as investment manager

Meanwhile, STRS was actually investing billions in private equity and other opaque alternatives, generating enormous fees and expenses while STRS investment employees collected millions in performance bonuses.

Those were precisely the investments, performance numbers, fees and bonuses that the reform trustees were questioning.

The Alleged Investment Mastermind Was Really an Ohio Republican Political-Financial Operator

Now look at Seth Metcalf, one of the principals behind QED.

Metcalf wasn’t a Blackstone or KKR portfolio manager.

His expertise was arguably more useful: Ohio politics, public finance and access to the people controlling public money.

His relationship with Republican Josh Mandel reportedly began when Metcalf managed Mandel’s student-government campaign at Ohio State.

After Mandel became Ohio Treasurer, Metcalf became his Deputy Treasurer and Executive Counsel.    This appears to be a Republican factional dispute between Treasurer Mandell vs. AG Yost.

Metcalf’s own State Financial Officers Foundation biography says that in the Treasurer’s office he helped oversee functions involving more than $20 billion of investments, $216 billion of custody assets and $60 billion of annual cash movements. He had also served as a trustee of OPERS and the Ohio Deferred Compensation Plan.

So Metcalf understood something extraordinarily valuable:

How public pension money gets allocated—and who controls the process.

Then Metcalf Became President of SFOF

This is where the QED story gets considerably more interesting.

Metcalf became president of the board of the State Financial Officers Foundation, a national organization connecting Republican state treasurers and other financial officials with private financial interests.  And among SFOF’s former financial supporters was one of the world’s largest private-equity firms:

KKR.

Historical sponsor records identify KKR as a former “Friend of SFOF.” Other financial-industry sponsors or supporters included Fidelity, Invesco, Entrust Global, Federated Hermes, JPMorgan and Wells Fargo.

KKR’s SFOF relationship has also been independently documented in research examining the private-equity firm’s political activities.

What was access to Ohio STRS worth?

STRS Was a Private-Equity Gold Mine

QED’s supposed “$65 billion” was hypothetical.

STRS’s private-equity money was real.

STRS has had roughly $10 billion of private-equity NAV and billions more of unfunded commitments, while regularly committing another billion dollars or more to PE funds.

For a KKR, Apollo, Blackstone, Ares or aspiring private-market manager, getting onto STRS’s manager roster can therefore be worth enormous amounts of money over time.

That changes how we should think about Metcalf.   Perhaps the valuable asset wasn’t QED’s investment technology.   Perhaps the valuable asset was access.  Metcalf had been:

Mandel political operative>Ohio Deputy Treasurer>OPERS trustee>Ohio Deferred Compensation trustee>President of SFOF>>QED principal

This was someone who understood the machinery connecting politicians, pension trustees, investment staffs and Wall Street.

KKR Makes the Contrast Remarkable

SFOF’s relationship with KKR deserves particular scrutiny.

KKR financially supported an organization headed by Metcalf whose membership consisted largely of state financial officials.

And there is a revealing example of what happened at SFOF meetings.

Alaska Permanent Fund travel records show its executive director traveled to SFOF’s 2017 annual meeting—and during that same trip met with KKR.

An enormous private-equity manager could participate in the same ecosystem bringing together officials controlling billions of public dollars.    Metcalf headed that organization.

And Metcalf himself had already sat on the board of one of America’s largest public pension systems.

Yet Ohio’s great fiduciary scandal somehow became:

Rudy Fichtenbaum talked to Seth Metcalf.

Two Very Different Standards

The contrast is extraordinary.

Metcalf/SFOF model:

Financial companies>SFOF>State treasurers and financial officers>Officials with influence over trillions in public assets

This was considered networking.

But:

Metcalf/QED>Fichtenbaum & Steen>Discussion of an investment concept>$0 invested

became a corruption scandal resulting in the removal of two pension trustees.

And nobody demonstrated that Fichtenbaum or Steen pocketed even $1 from QED.

Now Ask Who Actually Had Something to Lose

Fichtenbaum and Steen weren’t merely discussing QED.

They were part of a reform movement questioning the existing STRS investment establishment.

That meant asking uncomfortable questions about:

Private-equity fees.

Secret contracts.

Investment performance.

Benchmarks.

Staff compensation.

Millions of dollars in bonuses.

Those questions involved real money.

QED did not.

And this distinction becomes particularly important because recent academic research found that STRS’s reported investment return exceeded the return researchers calculated from audited financial information in 19 of 20 years.

Those performance numbers mattered because STRS investment employees received performance bonuses.

So ask the most basic investigative question:

Who actually had a financial interest in stopping the reform trustees?

The professor who received no demonstrated QED payoff?

Or the enormous existing ecosystem of investment managers, consultants and highly compensated investment employees whose fees, contracts, performance and bonuses were being questioned?

The Missing Question: What Could Metcalf Have Done With Influence?

This is the part of the story Ohio investigators apparently never pursued seriously.

Suppose Metcalf had obtained significant influence with a majority bloc on the STRS board.

He wouldn’t necessarily need QED to personally manage $65 billion.

Someone with Metcalf’s background would understand that influence over a pension board overseeing roughly $100 billion could itself be enormously valuable.

STRS staff negotiates and executes investment-manager mandates and fee agreements under authority delegated through the pension’s governance structure.

The system continually needs:

Private-equity managers.

Private-credit managers.

Real-estate managers.

Co-investments.

Joint ventures.

Consultants.

Technology.

Advisers.

And new investment ideas.

Wall Street firms compete ferociously for that business.

An intermediary doesn’t have to personally manage billions to potentially benefit from being able to open doors.

That does not establish that Metcalf intended to do any of those things.

But given his background, it is an obvious question investigators should have asked.

Especially Because SFOF Was Already Selling Access

This isn’t merely theoretical.

SFOF’s corporate model brought financial companies together with state financial officials.

And Metcalf was its board president.

The organization became sufficiently intertwined with financial-industry interests that Campaign for Accountability asked the SEC in 2024 to investigate whether investment-adviser support for SFOF could implicate pay-to-play rules.

Then in May 2026, the same watchdog organization called for Metcalf himself to be removed as SFOF president because of his QED activities.

There is a remarkable irony here.

Ohio’s government successfully removed Fichtenbaum and Steen from STRS.

Yet the politically connected entrepreneur whom the court portrayed as directing them remained president of an organization connecting financial interests with public officials.

Maybe QED Wasn’t the Scandal. Maybe It Was the Weapon.

Nobody needs to believe QED was a good investment idea.

It wasn’t an established investment manager. It had no clients or track record and never received STRS assets. Even critics of the prosecution can readily conclude STRS should never have handed it billions.

But that’s not what happened.

QED got $0.

Meanwhile, STRS’s existing Wall Street managers got billions.

And the trustees raising questions about those billions were removed.

That is why Ohio should reopen the question from the opposite direction.

Don’t start with QED.

Start with the billions actually invested.

Identify every STRS private-equity manager.

Identify every fee.

Identify every no-bid or privately negotiated mandate.

Identify every SFOF sponsor.

Then cross-match them.

KKR is an obvious place to start.

KKR supported SFOF.

Metcalf ran SFOF.

Metcalf understood Ohio pension governance from the inside.

And STRS represents precisely the kind of enormous institutional pool private-equity firms compete to access.

If KKR and other SFOF-connected financial firms also held substantial STRS mandates during this period, that relationship deserves far more scrutiny than an imaginary $65 billion QED investment that never happened.

Metcalf didn’t have to imagine whether SFOF relationships could be monetized in the public-pension business. He could watch it happen. While Metcalf served as SFOF’s board president, the organization elevated fellow Ohio entrepreneur Vivek Ramaswamy as a leading anti-ESG voice. Ramaswamy then launched Strive—the “anti-BlackRock”—and SFOF-connected officials helped open doors to public pension systems. Missouri’s treasurer acknowledged that he was connected to Ramaswamy through SFOF; Strive officials met pension officials through the network; and Strive ultimately won public-pension advisory business. In other words, the SFOF model demonstrated that political-financial relationships could become pension business. Metcalf, a former Ohio deputy treasurer and OPERS trustee, would have understood that lesson better than almost anyone

Follow the Two Piles of Money

Ohio followed this pile:

QED: $0

It found Rudy Fichtenbaum and Wade Steen.

Now follow the other pile:

Private Equity: Billions

There you find investment managers, secret contracts, fees, consultants, staff bonuses—and potentially some of the same financial networks surrounding the politically connected man at the center of QED.

Ohio spent years investigating the professor who questioned the system.

Maybe it’s finally time to investigate the system he was questioning.

SFOF expose by Lever https://www.levernews.com/alleged-fraudsters-are-fueling-trumps-fraud-crusade/ https://www.documentcloud.org/documents/28133993-may-2026-sfof-letter/?ref=levernews.com

Ohio STRS Investment Staff: Paid Excessively to Look the Other Way

EPSTEIN, APOLLO, AND OHIO TEACHERS’ BILLIONS

Apollo Divestment Case for Jeffrey Epstein ties stronger after Wyden Letter

Columbus: The Highest Public Salaries in America — and Ohio Teachers are Paying for It

Ohio’s Epstein Blind Spot: While Wexner Dominates Headlines, Apollo’s Leon Black remains in Shadows

Ohio Media’s Complicity: How a Fake Scandal Hid the Real Teacher Retirement System Corruption

Private equity has spent decades operating where most Americans rarely see it.

A pension fund owns an LP interest in a private-equity fund. The PE fund owns dozens of companies. The contracts are secret. The fees are complicated. The valuations are subjective. The conflicts are buried in hundreds of pages of documents.

Try explaining that at a neighborhood bar.

Now private equity is buying something entirely different:

Your team.

And that may turn out to be one of Wall Street’s biggest political mistakes.

Fans Aren’t Pension Trustees

People have emotional relationships with sports teams that they simply do not have with investment funds.

They grow up with them.

Their parents took them to games.

They buy jerseys for their children.

Cities build stadiums around them.

And increasingly, millions of Americans have actual money riding on what happens on the field through legalized sports betting.

That creates an explosive combination:

Private capital + beloved civic institutions + billions of dollars of gambling + relatively weak and fragmented regulation.

Private equity may have just kicked over a hornet’s nest.

Sports Has Become an Alternative Asset Class

Institutional investors reportedly now hold interests in dozens of North American professional teams.

MLB opened the door to private-equity ownership in 2019.

The NFL followed in 2024.

The NBA, NHL and international soccer have their own variations.

The sales pitch sounds remarkably similar to what pension funds and 401(k) fiduciaries hear about private markets:

Sports franchises are scarce assets.

Revenue is resilient.

Media rights provide predictable cash flows.

Fan loyalty creates barriers to entry.

Franchise values have historically appreciated.

In other words, Wall Street has discovered that perhaps the ultimate captive customer is a sports fan.

The Lakers Are a Warning

The extraordinary escalation in the valuation of the Los Angeles Lakers illustrates what is happening.   A franchise isn’t simply a basketball team anymore.  It is a media asset.

A real-estate opportunity.  A sponsorship platform. A gambling ecosystem. A data business. An entertainment property. And increasingly, an institutional investment.

The danger is that the incentives of the financial owner and the interests of the fan aren’t necessarily the same.

The old owner might have wanted to win a championship. The new financial owner also has to think about IRR. That difference matters.

Henry Abbott Has Been Asking the Right NBA Questions

Basketball journalist Henry Abbott has spent years examining the economics and governance of the NBA rather than simply covering what happens on the court.

Josh Harris is an especially interesting case study.

The modern sports billionaire may simultaneously operate across private equity, professional sports, finance, media relationships and other businesses.

That doesn’t establish wrongdoing.

But it creates something regulators and journalists should understand very well:

conflicts.

And sports leagues largely depend upon themselves to police those conflicts.

Then Add Gambling

This is where the issue becomes much larger.

Professional sports isn’t merely entertainment anymore.

Americans are wagering enormous sums on games, players and individual events within games.

That changes the public-policy stakes.

An owner isn’t merely controlling an entertainment company.

The owner controls an organization producing events upon which outsiders are wagering billions of dollars.

Suddenly questions that once sounded like obscure corporate-governance issues become much more important:

Who owns pieces of multiple teams?

What other businesses do those owners control?

Who finances the teams?

Who owns the media companies?

Who has relationships with sportsbooks?

Who owns the data?

Who receives nonpublic information?

What investments do the owners’ funds hold in companies doing business with their teams or leagues?

And who is actually checking?

Britain Already Knows What Financialization Can Do to Sports

American regulators should spend some time studying British football.

The UK provides decades of examples of what can happen when football clubs become financial assets: leveraged acquisitions, complicated ownership structures, related-party transactions, distressed clubs and supporters discovering that the institution they regarded as belonging to their community was legally somebody else’s financial property.

British football journalist Paul Brown and others have chronicled parts of this transformation.

American sports may be traveling down a similar road—with private equity and sports betting added to the mix.

Now Follow the Money Back to Pension Funds

Here is the part almost nobody in sports journalism is connecting.

Where does private equity get the money?

Much of it ultimately comes from institutional investors.

Public pension funds.

Corporate pension funds.

Endowments.

Foundations.

And increasingly, Wall Street wants access to 401(k)s.

So a teacher, firefighter or state employee can potentially participate in this system twice.

First as a fan, paying increasingly expensive tickets, television subscriptions, merchandise and perhaps gambling losses.

Then as an investor, with retirement money committed to the private funds participating in the financialization of sports.

And the worker may have remarkably little ability to examine what is happening with either role.

The Same Governance Problems Keep Appearing

This is what makes the sports story so important.

The issues are remarkably similar to the problems we have documented in private equity generally:

Opaque ownership.

Secret contracts.

Related-party transactions.

Complicated fee structures.

Questionable valuations.

Multiple layers of intermediaries.

Potential conflicts involving advisers and investors.

Weak or fragmented regulatory oversight.

Enormous amounts of institutional money.

And perhaps most importantly:

The people whose money ultimately finances the system often have the least information about it.

Wall Street Wants Your 401(k), Too

This comes at precisely the moment private-equity managers are trying to expand into America’s enormous defined-contribution retirement system.

As CommonSense recently documented, Bloomberg found evidence raising serious questions about thousands of supposedly grassroots comments supporting the Labor Department’s private-equity initiative—including comments attributed to people who were already dead.

The economic incentive isn’t difficult to understand.

Traditional institutional investors have become increasingly concerned about private-market fees, liquidity, valuations and distributions.

Wall Street needs additional capital.

America’s 401(k) system contains trillions of dollars.

The sports boom provides another window into the same phenomenon.

Private equity keeps searching for pools of dependable cash flow.

Pensions provide dependable capital.

401(k)s provide dependable contributions.

Sports provide dependable fans.

And sports betting provides another enormous stream of money surrounding those fans.

The Hornet’s Nest

Private equity has survived decades of criticism over pension investments partly because pension governance is boring.

LPAs are boring.

Valuation policies are boring.

Fee reconciliation is boring.

ERISA prohibited-transaction rules are boring.

Try telling a Lakers fan that the people financing his team may have undisclosed conflicts.

That isn’t boring.

Try telling a Manchester United supporter that his club is primarily an asset on somebody’s balance sheet.

Not boring.

And try telling someone who just wagered $2,000 on a game that the ownership, financing and business relationships surrounding the teams are too complicated or proprietary for the public to examine.

Definitely not boring.

That is why sports could become private equity’s unexpected political problem.

Private equity didn’t merely buy another portfolio company.

It bought something people love.

And unlike pension beneficiaries trying to obtain a private-equity contract from their retirement system, sports fans number in the tens of millions.

They watch every night.

They argue about every decision.

They follow every dollar.

And increasingly, they bet real money on the outcome.

Private equity may discover that sports fans are considerably harder to manage than pension trustees.

Private equity has found its most powerful argument for getting into 401(k) target-date funds:

“Private equity lowers portfolio risk because it has low correlation with public stocks.”

An ERISA fiduciary should be extremely careful before putting that sentence into an investment-committee memo.

Because the apparent diversification can be partly an artifact of how private assets are valued.

Public stocks are marked every trading day. Private-equity holdings may be valued periodically using estimates, models and manager judgments. Market movements therefore don’t necessarily appear immediately in reported NAV.

The result can be:

Smoothed NAV → artificially low measured volatility → artificially low measured correlation → artificially attractive Sharpe ratio → apparent diversification benefit.

The economic risk hasn’t necessarily disappeared.

The ruler changed.

And there is unusually strong independent support for that proposition.

Even T. Rowe Price warns that smoothing distorts diversification statistics

This isn’t merely an argument made by private-equity critics.

T. Rowe Price’s analysis of private-asset diversification acknowledges that appraisal-based valuations and the absence of mark-to-market pricing can make private-asset performance incomparable with public assets.

Its conclusion is particularly important: smoothed results do not accurately represent the actual volatility and correlation characteristics of private investments. Its analysis found that, over longer periods that diminish the smoothing effect, private-equity volatility was comparable with large-cap public equities over one-year periods and higher over rolling three-year periods.

That is potentially devastating to the simplistic TDF sales pitch.

Suppose an optimizer is given:

Input	Public equities	Reported PE
Standard deviation	18%	10%
Correlation	1.00	.50
Expected return	8%	10%

Of course the optimizer wants PE.

But suppose economic reality after correcting for stale pricing looks more like:

Input	Public equities	Unsmoothed PE
Standard deviation	18%	20%
Correlation	1.00	.85
Expected return	8%	10%

The alleged diversification miracle largely disappears.

Garbage risk statistics in → fiduciary-looking efficient frontier out.

---

The academic evidence is even stronger

Boyer, Nadauld, Vorkink and Weisbach published an important Journal of Finance paper using PE secondary-market transactions.

Their conclusion:

“Net asset values are too smooth.”

They found that NAVs fail to reflect changes in discount rates and warned that ignoring that variation can result in misallocation of capital.

That goes directly to the 401(k) issue.

The relevant fiduciary question isn’t:

“What standard deviation did the PE manager report?”

It is:

“What would the volatility, beta and correlation look like if these assets were continuously market-priced like everything else in the target-date fund?”

A fiduciary who doesn’t ask that question could be comparing apples with periodically appraised oranges.

Recent NBER research provides another warning. Ercan, Kaplan and Strebulaev found that the history of private-equity interim valuations contains information beyond the latest reported valuation; greater valuation staleness and repeated markdowns help predict subsequent outcomes.

In other words, the latest NAV isn’t necessarily the whole risk story.

---

Bailey and López de Prado: serial correlation can hide enormous downside risk

David Bailey and Marcos López de Prado provide another piece of this puzzle. https://lnkd.in/eqvbp7qC

Their research examined the consequences of treating serially correlated investment returns as though returns were independent.

Their finding was remarkable:

Ignoring serial correlation can underestimate downside potential by as much as 70%.

Their paper concerns hedge-fund strategies rather than specifically PE target-date funds, so I would not claim they proved that PE risk is understated by 70%.

But the methodological warning is directly relevant.

When smoothed or stale marks create serial correlation, conventional risk measures can badly mischaracterize the underlying risk.

An ERISA fiduciary therefore shouldn’t accept a consultant’s standard deviation, Sharpe ratio or correlation matrix without asking:

How were the private-market returns adjusted for smoothing and serial correlation?

If the answer is they weren’t, the supposedly sophisticated asset-allocation model may be built on a fundamental statistical mismatch.

---

This is the same “Risk Illusion” we identified with TIAA

The structure closely resembles the problem I previously identified with TIAA’s target-date modeling.

TIAA’s annuity doesn’t fluctuate like a bond fund because there isn’t a continuously traded security producing a market price every day. The crediting process and insurance structure smooth what participants see.

That can make an illiquid contractual asset look statistically safer than a liquid security.

The CommonSense analysis called this “fake volatility”: risk can be transferred or hidden without disappearing.

Private equity potentially brings the same problem to the equity side of the glidepath.

Put the two together and a next-generation TDF could theoretically contain:

Public Stocks + Bonds + Private Equity + Private Credit + Real Estate + Annuities

and report beautifully diversified historical statistics.

But some of the apparent diversification may arise precisely because the assets aren’t being priced on the same basis.

That is not necessarily diversification.

It can be accounting diversification.

---

Why this creates ERISA litigation exposure

This is where the issue gets much more serious.

ERISA doesn’t ask whether a consultant’s PowerPoint produced an attractive efficient frontier.

The fiduciary must undertake a prudent process.

The Department of Labor’s PE guidance specifically recognized that private equity presents greater complexity, longer time horizons, less liquidity, different regulatory/disclosure standards, more complicated valuation and typically higher fees. It said fiduciaries considering PE should conduct an objective, thorough and analytical process, secure sufficient information to understand the investment and its risks, and compare a PE-containing fund against alternatives without PE.

Important current-law qualification: the Biden-era 2021 Supplemental Statement was rescinded in August 2025, so it should not be presented as current DOL policy. But its description of the underlying valuation/liquidity problems—and the underlying fiduciary principles—remains historically useful evidence of risks regulators specifically identified.

The original 2020 Information Letter itself did not authorize standalone participant PE investments; it addressed PE as a component of professionally managed asset-allocation funds.

That makes the target-date fund exactly where this fight is likely to occur.

The plaintiff’s discovery request practically writes itself

Imagine the investment committee approves a TDF containing 10% PE because the consultant says PE reduces volatility and improves diversification.

Five years later participants sue.

Plaintiffs ask for:

1. Every correlation matrix presented to the committee.
2. The raw return series underlying those correlations.
3. Reported and unsmoothed PE volatility.
4. The methodology used to correct quarterly/stale valuations.
5. Serial-correlation adjustments.
6. Public-market-equivalent analysis.
7. Secondary-market valuations.
8. Stress-period correlations.
9. The underlying LPAs and side letters.
10. Every analysis comparing the PE TDF with a low-cost liquid TDF without PE.

Then comes the deposition:

Q. You concluded private equity reduced the target-date fund’s risk?

A. Yes.

Q. You knew public equities were priced daily?

A. Yes.

Q. You knew the private investments weren’t?

A. Yes.

Q. What adjustment did you make before comparing their standard deviations and correlations?

A. None.

That’s the problem.

---

The WSJ article raises the fiduciary standard even further

Jason Zweig’s new Wall Street Journal article warns ordinary investors about precisely the characteristics that can disappear behind the PE-diversification sales pitch: infrequent and potentially dubious valuations, limited liquidity, high and variable fees, adviser incentives and the complexity of private funds.

Zweig recommends asking detailed questions and getting the answers in writing.

Jason Zweig — What to Ask When Your Adviser Pushes Private Funds

That creates an uncomfortable ERISA question:

If the Wall Street Journal says a retail investor should question the valuation and liquidity of a $50,000 private investment, what excuse does an ERISA fiduciary have for accepting a consultant’s correlation matrix before putting $500 million of workers’ retirement money into PE?

---

And then we reach the CIT

This is where your recent contract work and the risk-smoothing argument come together.

A conventional mutual fund provides investors a registered security with substantial standardized public disclosure.

The emerging private-market TDF can instead look like:

401(k)
↓
Target-Date CIT
↓
Private-Market CIT / Feeder
↓
Conduit / Alternative Investment Vehicle
↓
Private-Equity Partnership
↓
Portfolio Companies

Your recent CommonSense article argues that these structures can provide much less participant visibility into the underlying contracts and economics.

CommonSense — SEC Mutual Fund Standards Are Slipping, But Not Fast Enough for Private Equity

I would make one legal distinction very clear: a state-regulated CIT does not itself legalize bad valuation, an imprudent investment process, or an ERISA prohibited transaction.

Its importance to your thesis is different:

The CIT can obscure the evidence necessary to test the sales pitch.

The participant sees:

“2055 Target Retirement Fund.”

The fiduciary may be shown:

“Lower volatility + lower correlation + higher expected return.”

But underneath those statistics can sit bespoke PE contracts, GP valuations, feeder vehicles, different liquidity rights, leverage, affiliated fees and other contractual economics that aren’t apparent from the TDF’s name or headline statistics.

That makes your contract article the second half of this story.

CommonSense — The Contracts Private Equity Doesn’t Want 401(k) Participants to See

---

Anderson v. Intel makes this especially dangerous

Anderson v. Intel Corporation Investment Policy Committee is about whether an ERISA underperformance complaint must allege a “meaningful benchmark” to survive dismissal. The underlying Intel plans invested through target-date/global-diversified funds containing alternative investments, including PE and hedge funds.

Now combine that litigation issue with private-market smoothing.

The PE industry can potentially argue on the front end:

“Our low correlation proves PE reduces risk.”

And defendants can argue after litigation begins:

“Plaintiff hasn’t identified an appropriate meaningful benchmark.”

But how does the participant construct the correct benchmark if the underlying contracts, valuations, leverage and actual economic exposures aren’t publicly available?

That is why valuation opacity + contractual secrecy + meaningful-benchmark pleading requirements could become an extraordinarily powerful defense mechanism.

Your argument shouldn’t be that every low correlation is “fake.”

It should be harder to rebut:

A fiduciary cannot prudently rely on reported PE correlation and volatility without determining whether stale or discretionary valuations materially suppress those statistics.

---

The fiduciary litigation test

I would end the piece with this.

Before a fiduciary accepts the statement “private equity reduces TDF risk,” demand six numbers:

Reported PE volatility.
Unsmoothed PE volatility.
Reported stock/PE correlation.
Unsmoothed stock/PE correlation.
Stress-period correlation.
Secondary-market discount to reported NAV.

Then demand the methodology and underlying data in writing.

If the PE manager won’t provide them, don’t let the consultant put “diversification benefit” in the investment committee minutes.

Because after the lawsuit is filed, that phrase may become Exhibit A.

Bottom line

Private equity does not become safer because its price moves less often.

An asset that isn’t marked doesn’t have zero volatility. It has unreported volatility.

And a target-date fund doesn’t become diversified merely because a spreadsheet combines daily-priced public securities with quarterly manager-valued private assets and produces a low correlation coefficient.

For an ERISA fiduciary, mistaking valuation smoothing for risk reduction isn’t sophisticated diversification. It is potentially discoverable evidence of a flawed fiduciary process.

CommonSense — Private Equity Business Model Depends on Secrecy, Fake Benchmarks and Fiduciary Illusions

THE CONTRACTS PRIVATE EQUITY DOESN’T WANT 401(k) PARTICIPANTS TO SEE

SEC Mutual Fund Standards Are Slipping — But Not Fast Enough for Private Equity, Which Is Turning to State-Regulated CITs – 2 roads into your 401(k)

A Complaint-Style ERISA Analysis of Blackstone, Apollo, Carlyle, Vista, Oak Hill, New Mountain and KKR Partnership Agreements

Preliminary Statement

1. Private equity’s campaign to enter America’s 401(k) plans is commonly presented as a debate about asset allocation. It is not.
2. The more important question is contractual:

What exactly is the retirement plan buying?

3. Private-equity managers can argue that the products eventually sold through 401(k) target-date funds will be different from the institutional private-equity partnerships that have historically been sold to public pension funds.
4. There is a simple way to test that assertion.

Produce the contracts.

5. The historical contracts reviewed here include limited partnership agreements involving Blackstone, Apollo, Carlyle, Vista Equity Partners, Oak Hill, New Mountain and KKR. They are not hypothetical contracts reconstructed by critics. They are actual institutional private-equity agreements.
6. Many have been publicly available through the Naked Capitalism Document Trove for roughly a decade. The Trove describes its collection as including agreements obtained from Pennsylvania’s public contracting records, Kentucky public pensions and other authorized sources and notes the industry’s extraordinary efforts to maintain LPA confidentiality. https://trove.nakedcapitalism.com/
7. The contracts themselves demonstrate that secrecy is not incidental. Vista’s agreement, for example, says the agreement is confidential, may not be reproduced or transmitted, and may not be disclosed without Vista’s prior written consent.
8. Blackstone Capital Partners V goes even further on its cover: “HIGHLY CONFIDENTIAL & TRADE SECRET.”
9. Carlyle Partners V similarly labels its agreement “TRADE SECRET AND STRICTLY CONFIDENTIAL.”
10. Yet these agreements have been available for public inspection for years.
11. That history raises an obvious question as private equity seeks access to trillions of dollars of ERISA retirement savings:

If the contracts are suitable for workers’ retirement money, why shouldn’t the workers whose money is invested be allowed to read them?

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COUNT I

PRIVATE EQUITY’S CONTRACTS EXPRESSLY CONTEMPLATE AVOIDING ERISA PLAN-ASSET STATUS

12. The most important provisions in these documents may be the provisions discussing ERISA itself.
13. Apollo Investment Fund VIII defines “Significant Benefit Plan Investment” as ownership by ERISA investors of 25% or more of the value of any class of equity interests in the partnership or certain conduit vehicles.
14. Apollo then states its objective expressly. The General Partner will use reasonable best efforts to conduct the partnership so its assets will not be treated as Plan Assets, including by:

• qualifying for the VCOC exception;
• limiting ERISA investors to avoid “Significant Benefit Plan Investment”; or
• using another statutory or regulatory exception.

15. Carlyle’s agreement is equally revealing. Where benefit-plan investors own less than 25% of each equity class, the GP may certify that the partnership’s assets should not constitute ERISA plan assets.
16. Blackstone defines a benefit-plan-investor entity by reference to the same 25% threshold.
17. Blackstone also promises to use reasonable best efforts to maintain VCOC treatment and to structure alternative investment vehicles so that their assets do not constitute the plan assets of ERISA investors.
18. This distinction is critical.
19. Keeping ERISA investment below the relevant threshold does not mean the ERISA plan fiduciary that purchases the investment ceases to owe fiduciary duties.
20. Rather, the structure seeks to prevent ERISA from “looking through” the partnership interest and treating the partnership’s underlying assets as plan assets—with the resulting fiduciary and prohibited-transaction consequences for persons exercising authority over those assets.
21. In other words:

ERISA money can enter the front door while the private-equity manager seeks to keep ERISA’s fiduciary rules from following that money through the door.

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COUNT II

THE CONTRACTS SHOW THAT THIS IS AN INTENTIONAL STRUCTURAL OBJECTIVE, NOT AN ACCIDENT

22. These are not boilerplate references buried in definitions.
23. The agreements contain elaborate mechanisms for dealing with the possibility that ERISA might apply.
24. Vista permits a Limited Partner to be forced to withdraw if its participation could cause partnership assets to be characterized as employee-benefit-plan assets.
25. New Mountain similarly provides mechanisms for disposing of an ERISA investor’s interest to prevent the fund’s assets from becoming “plan assets.”
26. Blackstone restricts transfers that could cause partnership assets to become plan assets or cause the General Partner to become an ERISA fiduciary.
27. Apollo goes further still.
28. Its agreement permits an ERISA investor to opt out where participation could constitute a prohibited transaction under ERISA §406 or Code §4975 or cause partnership assets to become Plan Assets.
29. These provisions constitute powerful evidence of something that is often missing from the public discussion about “democratizing” private equity:

The private-equity industry knows exactly where the ERISA line is and drafts sophisticated contractual machinery around it.

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COUNT III

THE CONTRACTS CREATE MULTIPLE VEHICLES BETWEEN THE RETIREMENT INVESTOR AND THE ACTUAL ASSETS

30. The agreements also demonstrate why the structure of a future 401(k) private-equity product matters as much as its label.
31. Carlyle expressly authorizes parallel investment entities and feeder funds.
32. Apollo authorizes Alternative Investment Vehicles and still another category called a “Conduit Vehicle.”
33. Most strikingly, Apollo says that a Conduit Vehicle need not be structured to meet the VCOC exception or avoid Significant Benefit Plan Investment. Instead, the arrangement can deem the ERISA investor to have directed the investment and deem the vehicle’s manager a custodian rather than an ERISA fiduciary.
34. Blackstone contains a comparable concept involving an “Intermediate Entity.” It acknowledges that the intermediate entity’s assets may themselves constitute plan assets while stating that its manager is nevertheless “not intended to be a fiduciary” with respect to those assets.
35. These provisions deserve enormous scrutiny before analogous structures are placed beneath a 401(k) target-date fund.
36. A participant may see:

Target Date 2050

37. Underneath it may sit:

Target-Date CIT → Private-Market CIT/Feeder → Conduit/Intermediate Vehicle → PE Partnership → Portfolio Company.

38. That complexity isn’t merely operational. Each additional entity can affect regulatory status, valuation, liquidity, disclosure and who is—or is not—treated as exercising fiduciary authority.
39. This is why the current movement toward state-regulated CIT structures deserves examination. SEC mutual funds still face federal liquidity, valuation, disclosure and governance constraints. More complicated private-market arrangements can instead be layered beneath CITs that participants may find extraordinarily difficult to penetrate.

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COUNT IV

THE CONTRACTS CONTAIN THE VERY CONFLICTS AND AFFILIATED PAYMENTS ERISA IS SUPPOSED TO POLICE

40. These agreements aren’t simply passive investment mandates.
41. Blackstone VI expressly recognizes that Blackstone and its affiliates may receive financial-advisory fees, monitoring fees, organization and financing fees, divestment fees, directors’ fees and other compensation involving companies in which the partnership invests.
42. Another Blackstone VI provision says its adviser or affiliates may receive break-up and topping fees, monitoring and director fees, organization, financing and divestment fees and similar compensation.
43. Apollo’s definition of “Special Fees” is almost a catalog of potential conflicts:

consulting fees, monitoring fees, investment-banking fees, advisory fees, breakup fees, directors’ fees, closing fees, transaction fees and Bridge Fees, including noncash consideration such as options and warrants.

44. Oak Hill’s agreement expressly contemplates transactions involving partners and affiliates, subject to contractual protections and Advisory Board approval for material transactions.
45. None of those clauses standing alone proves an ERISA violation in a particular future 401(k) investment.
46. They prove something different and highly relevant:

Affiliated transactions and multiple streams of compensation are built into the contractual architecture of institutional private equity.

47. A prudent ERISA fiduciary therefore cannot responsibly approve a private-equity allocation by reviewing only the headline management fee.
48. The fiduciary must understand the entire economic relationship among the fund, GP, affiliates, portfolio companies, intermediaries, consultant, trustee and plan.

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COUNT V

CUNNINGHAM v. CORNELL MAKES THOSE TRANSACTIONS MORE IMPORTANT, NOT LESS

49. In Cunningham v. Cornell University, the Supreme Court unanimously held in 2025 that ERISA §406(a)(1)(C) defines the prohibited transaction and that the §408 exemptions operate as affirmative defenses rather than additional elements participants must plead.
50. That does not automatically make every private-equity fee or affiliated transaction prohibited.
51. But it makes contractual transparency extraordinarily important.
52. If plan assets are used in transactions involving parties in interest, the fiduciary must understand the transaction sufficiently to determine whether ERISA’s prohibited-transaction rules are implicated and, where relevant, whether an exemption can be established.
53. A fiduciary cannot perform that analysis from a marketing presentation saying:

“Private Equity — 10% Allocation.”

54. The contract matters.
55. The affiliates matter.
56. The fees matter.
57. The compensation flowing from portfolio companies matters.
58. The intermediate entities matter.
59. And the actual legal relationships matter.

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COUNT VI

THE CONTRACTS THEMSELVES UNDERMINE THE ARGUMENT THAT PARTICIPANTS DON’T NEED THEM

60. Private equity traditionally insists that LPAs are confidential.
61. KKR’s agreement provides a particularly revealing compromise.
62. A governmental plan may publicly disclose certain high-level information—commitments, capital drawn, distributions, reported value, IRRs, multiples and management fees—but the agreement still separately maintains confidentiality restrictions over broader partnership information.
63. That distinction matters.
64. Knowing that a pension invested $100 million and paid a reported management fee is not the same as knowing:

• what affiliated transactions are permitted;
• who controls valuation;
• what additional fees affiliates receive;
• what leverage is permitted;
• what side arrangements exist;
• what withdrawal rights exist;
• what indemnification protects the GP;
• what happens if ERISA plan-asset status arises; and
• what vehicles can be inserted between investor and asset.

65. Those questions require the governing documents.

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COUNT VII

ANDERSON v. INTEL EXPOSES THE PLEADING TRAP CREATED BY PRIVATE-EQUITY SECRECY

66. This becomes particularly important in Anderson v. Intel Corporation Investment Policy Committee, now before the Supreme Court.
67. Intel’s retirement funds invested in hedge funds and private equity. The Ninth Circuit nevertheless rejected Anderson’s prudence claim, reasoning that he had not identified an adequate “meaningful benchmark” and emphasizing that he supposedly had sufficient information about Intel’s underlying investments to develop comparators.
68. The Supreme Court granted review on January 16, 2026.
69. The case presents a potentially perverse result when applied to the next generation of private-market 401(k) products.
70. Wall Street could construct an investment whose underlying contracts are:

private, bespoke, illiquid, model-valued, layered through multiple vehicles and protected by confidentiality provisions.

71. Then, when a participant challenges the investment, defendants could demand that the participant identify a nearly identical “meaningful benchmark” before discovery.
72. But the information necessary to identify the benchmark—or to show why the investment was imprudent—may reside in documents the participant isn’t permitted to see.
73. That risks turning opacity itself into a pleading defense.
74. The Ninth Circuit said plaintiffs shouldn’t be required to plead facts “solely” in defendants’ possession, but simultaneously concluded that Anderson had enough information to identify comparators.
75. Private-equity LPAs expose why that assumption becomes increasingly problematic.
76. Knowing the name of the PE fund isn’t knowing the investment.
77. The investment is the contract.

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COUNT VIII

THE WALL STREET JOURNAL HAS NOW ASKED RETAIL INVESTORS TO DEMAND INFORMATION 401(k) PARTICIPANTS MAY NEVER RECEIVE

78. The irony became even sharper in August 2026.
79. Jason Zweig’s recent Wall Street Journal article warns individual investors considering private funds to investigate fees, liquidity restrictions, valuation reliability, adviser incentives, distributions and the adviser’s expertise—and recommends getting answers in writing.
80. Zweig reports that advisers could move approximately $2 trillion of client money into private funds through 2030 and describes the investments as complex and opaque, with high and variable fees, potentially questionable valuations and restricted liquidity.
81. That creates an extraordinary double standard.
82. The Wall Street Journal is effectively telling an individual investor:

Ask what you’re buying.
Ask what it costs.
Ask who gets paid.
Ask how it is valued.
Ask how you get out.
Get the answers in writing.

83. Yet a 401(k) participant whose fiduciary invests retirement savings through a target-date CIT may receive considerably less information about the underlying private-equity contract.
84. If those questions are appropriate before an individual puts $50,000 into a private fund, they are indispensable before an ERISA fiduciary places $500 million of workers’ retirement savings into one.

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COUNT IX

“OUR 401(k) CONTRACT WILL BE DIFFERENT” IS NOT AN ANSWER

85. Private-equity managers will undoubtedly respond that these agreements are old institutional contracts and that future 401(k) products will contain different protections.
86. Good.
87. Show us the new contracts.
88. The existence of historical LPAs does not prove that every future 401(k) PE agreement will contain identical provisions.
89. It does establish the appropriate baseline for due diligence.
90. A fiduciary considering a new PE vehicle should compare the proposed 401(k) contract provision-by-provision against the manager’s traditional institutional LPA.
91. The fiduciary should identify exactly what changed:

Historical PE provision	Required 401(k) inquiry
Keep benefit-plan ownership below plan-asset threshold	Has this survived?
VCOC exemption	Is the manager still avoiding look-through ERISA fiduciary status?
Alternative investment vehicles	What entities can participant money be moved into?
Feeder/conduit vehicles	Who is fiduciary at each level?
GP-controlled valuation	Who independently verifies NAV?
Monitoring/transaction/advisory fees	Who receives them and what offsets exist?
Affiliate transactions	Are they permitted? Under what safeguards?
Borrowing/guarantees	What leverage exists at every level?
Long lockups/transfer restrictions	How does the TDF provide daily participant liquidity?
Confidentiality	Can participants obtain the actual governing agreement?
ERISA withdrawal provisions	What happens if plan-asset status changes?
Indemnification/exculpation	Who bears the economic cost of misconduct?

92. If the industry says those provisions have disappeared, disclosure will establish that fact.
93. If it refuses to disclose the agreement, the fiduciary should not simply assume they disappeared.

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COUNT X

COMPLEX CIT STRUCTURES CAN MAKE THE CONTRACT HARDER TO FIND—THEY DO NOT MAKE THE CONTRACT DISAPPEAR

94. The emerging 401(k) structure may create several levels between participant and PE manager.
95. As discussed in the CommonSense analysis of the two emerging roads into 401(k)s, SEC mutual funds face public filings, liquidity regulation, valuation requirements and Investment Company Act governance. Some emerging private-market products instead use CITs and underlying vehicles. CommonSense: “SEC Mutual Fund Standards Are Slipping — But Not Fast Enough for Private Equity”
96. The critical question is therefore not merely:

“Does the TDF contain private equity?”

97. It is:

“Show us every contract underneath the TDF.”

98. Follow the participant’s dollar:

401(k) Plan
↓
Target-Date CIT
↓
Private-Market CIT / Feeder
↓
Conduit / Alternative Investment Vehicle
↓
Private-Equity Partnership
↓
Portfolio Company

99. Then identify at every level:

Who is the fiduciary?
Who values the asset?
Who receives compensation?
Who can transact with affiliates?
Who controls liquidity?
Who can borrow?
Who can pledge assets?
Who can change the structure?
And which entity is deliberately structured so that ERISA does not look through to its assets?

---

PRAYER FOR RELIEF

DISCLOSE THE CONTRACT BEFORE INVESTING THE RETIREMENT MONEY

100. These historical agreements do not establish that private equity can never be prudently included in an ERISA plan.
101. They establish why no ERISA fiduciary should be permitted to rely on the words “private equity” as though they describe a standardized investment product.
102. They do not.
103. The economic investment is inseparable from its contractual terms.
104. Before investing participant assets, an ERISA fiduciary should obtain and analyze the complete LPA, subscription agreement, side letters, advisory agreement, fee-offset provisions, valuation provisions, credit arrangements, affiliated-transaction provisions, alternative-vehicle documents and ERISA provisions.
105. And participants challenging that decision should not be placed in the impossible position of having to plead what those secret contracts contain before they are allowed to obtain them.
106. The documents reviewed here reveal the fundamental contradiction in the private-equity industry’s push into defined-contribution retirement plans:

Private equity wants ERISA money.

Its own contracts show how carefully it has historically structured itself to prevent ERISA from following that money into the fund.

107. That does not by itself make the investment illegal.
108. But it makes disclosure, fiduciary due diligence and discovery indispensable.
109. And after Cunningham, with Anderson now before the Supreme Court, the governing contracts may become some of the most important documents in the next generation of ERISA private-equity litigation.

The simplest fiduciary test

Don’t tell participants the new 401(k) private-equity contract is different.

Show them.

For decades, SEC-registered mutual funds represented something close to the gold standard for retirement-plan investment transparency.

Daily NAV. Market-value accounting. Public filings. Liquidity requirements. Independent boards. Audited financial statements. Restrictions on affiliated transactions. And a federal regulator looking over the industry’s shoulder.

Wall Street increasingly wants to put private equity, private credit, private real estate and insurance contracts into 401(k) target-date funds.    The SEC has loosened enough to let some of this happen.  But apparently not enough.

That may help explain why some of the industry’s most ambitious new private-market target-date products are being built as state-regulated Collective Investment Trusts rather than SEC mutual funds.

And the history of stable value tells us why this matters.

---

In 2004, the SEC wouldn’t swallow a synthetic stable-value mutual fund

I know these products because I worked with synthetic stable value and 4 specific mutual funds.

The old structure was relatively simple:

SEC mutual fund  

Primarily 95%-100% mostly liquid fixed-income securities

Around 1% to 5% bank/insurance-company wrap contracts

The underlying bonds generally had market prices and could generally be sold. The wrap contracts allowed participants to transact at contract value. Yet that was enough to make the SEC uncomfortable.

A 2004 Scudder filing disclosed:

“The staff of the Securities and Exchange Commission has inquired as to the valuation methodology for Wrapper Agreements utilized by ‘stable value’ mutual funds…”

The problem wasn’t that the bond portfolio was full of illiquid junk.

It was accounting and valuation.

Scudder disclosed that if the SEC rejected the valuation treatment of the wrappers, the fund could no longer maintain its stable NAV.

And that’s essentially what happened. On November 17, 2004, Scudder PreservationPlus eliminated its wrapper agreements and became a fluctuating-NAV short-term bond fund.

The stable-value mutual-fund experiment disappeared.

I previously called this the SEC quietly killing stable-value mutual funds.  https://commonsense401kproject.com/2026/06/09/the-sec-quietly-killed-stable-value-mutual-funds-in-2004-and-that-tells-you-everything-about-private-equity-fixed-annuities-and-prohibited-transactions-in-401ks/

Twenty-two years later, compare that regulatory skepticism with what’s being permitted today.

---

Somehow a building can now have a daily “fair value”

The SEC hasn’t abandoned fair value.

But it has modernized how fair value can be determined.

SEC Rule 2a-5 allows investments without readily available market quotations to be assigned a good-faith fair value using established methodologies, inputs and assumptions. The valuation function can also be delegated to a valuation designee, typically the investment adviser, subject to board oversight and other requirements.

That has enormous implications for private assets.

Consider a private office building.

There is no NYSE closing price at 4 p.m.

Instead:

Private building >appraisal/model>$100 million “fair value”>private-real-estate fund NAV>target-date fund NAV>participant gets a daily price.

Nothing about putting a daily number on the building makes the building daily liquid.

Yet the accounting framework can produce a daily NAV.

Compare that with 2004

The irony is difficult to miss.

	2004 Synthetic Stable Value	2026 Private-Market TDF
Underlying asset	Mostly bonds	Private loans / buildings / PE
Observable market prices	Mostly yes	Often no
Actual underlying liquidity	Relatively high	Low to extremely low
Daily participant liquidity	Yes	Yes at TDF level
Valuation judgment	Mainly wrapper problem	Private-asset models/appraisals
SEC treatment	Structure disappeared after valuation challenge	Increasingly accommodated through fund structures

That looks like a substantial relaxation in practical terms.

But apparently it’s still not enough for private equity.

---

Franklin shows how far the SEC will go

Franklin Templeton’s new Retirement Advantage Plus target-date mutual funds are particularly instructive.

They are SEC-registered mutual funds.  And Franklin says they will provide private-market exposure while maintaining daily liquidity.

But look at what Franklin actually did.  It didn’t simply drop a conventional 10-year private-equity LP into the TDF.

Instead:

Franklin Retirement Advantage Plus SEC mutual fund

Franklin BSP Lending Fund>registered interval fund>private credit

and

Clarion Partners Real Estate Income Fund>registered interval fund>private real estate.

Franklin says private-market allocations generally range from only about 2% to 8% over the glide path. That’s revealing. The private assets remain illiquid.

The TDF remains liquid largely because roughly 92%–98% isn’t allocated to those private-market sleeves.

---

SEC liquidity rules still have teeth

An ordinary open-end mutual fund generally cannot simply load itself with illiquid assets.

Rule 22e-4 prohibits a fund from acquiring additional illiquid investments if doing so would leave more than 15% of net assets in illiquid investments. It also imposes liquidity-risk-management requirements.

So Franklin uses another registered vehicle as the middle layer.  That’s clever.

Daily-liquid TDF>limited-liquidity interval fund>illiquid asset.

The private loan hasn’t become liquid.  The building hasn’t become liquid.

The illiquidity has been pushed down another level.

---

But Private Equity wants more

Now look at what’s happening in the CIT world. 2% to 8% is not enough.

Great Gray’s Panorix Target Date Series isn’t an SEC mutual fund.

Great Gray explicitly tells investors that its funds are collective investment funds exempt from registration under the Investment Company Act of 1940 and Securities Act of 1933.

And what is Panorix designed to hold?  Private equity and private credit.

BlackRock supplies the custom glidepath and public/private-market investment components, while Wilshire oversees implementation and liquidity management.

The disclosed structure includes BlackRock private-equity exposure and a private-credit CIT trusteed by Goldman Sachs Trust Company, N.A.

But the target-date CIT sitting at the top is:

Great Gray Trust Company — Nevada.

That’s the part retirement fiduciaries should be asking about.

---

If SEC standards have become more accommodating, why go to Nevada?

That’s a better question than whether private equity is technically “allowed” in a mutual fund.

Clearly some private exposure can be engineered into an SEC structure.

Franklin just demonstrated it. But look at the compromises Franklin makes:

small 2%–8% private allocation registered interval funds limited private-market sleeves

SEC fair-value rules

SEC liquidity rules

SEC filings

Investment Company Act governance

public expense disclosures.

Now compare that with the ambition of private-equity managers.

They don’t necessarily want 2%.

They want private markets to become a permanent asset class in the 401(k) glidepath.

And they would presumably prefer to use products resembling the institutional contracts they already sell to pension funds:

PE partnerships

private-credit funds

capital calls

GP valuations

subscription lines

NAV financing

carried interest

side letters

long lockups

limited secondary markets.

Those contracts weren’t designed for SEC mutual funds.

---

The regulatory race may therefore look like this

Regulatory wrapper	What Wall Street can currently accomplish	Problem for private markets
SEC open-end mutual fund	Small private allocations increasingly possible	15% illiquid limit, daily liquidity, public disclosure, Rule 2a-5 valuation
SEC TDF + interval fund	Franklin gets PC/RE into TDF at ~2%–8%	Extra wrapper; interval-fund constraints; SEC oversight remains
Pennsylvania CIT	TIAA SIA lifetime-income TDFs; conventional CITs	Detailed state CIT rules, valuation/reporting and unusual liquidity provisions
OCC CIT	Private assets legally possible	Detailed federal CIF regulation and bank examination
Nevada CIT	Emerging PE/PC and complex annuity TDF structures	No comparable detailed CIT-specific operating code that we’ve identified

This does not prove that Nevada permits something the SEC, OCC or Pennsylvania legally prohibit.

The evidence supports a subtler and more troubling question:

Does Nevada allow today’s private-market contracts to be placed into retirement CIT structures with fewer modifications, fewer fund-specific regulatory constraints and less public transparency?

That’s where regulators should be looking.

---

The SEC’s standards may be slipping in exactly the wrong place

The SEC deserves credit for recognizing that not every legitimate asset has an exchange price.

But there’s an enormous difference between:

no exchange price  and  no real market.

Rule 2a-5 says a market quotation is “readily available” only where there is an unadjusted quoted price in an active market for an identical investment. Otherwise, a registered fund can employ a good-faith fair-value process.

That’s reasonable for many securities.  Private equity pushes the concept toward its limit.

Imagine:

PE manager values portfolio company>PE partnership calculates NAV>private-market vehicle incorporates that value>TDF incorporates that NAV>401(k) participant receives daily TDF NAV.

There may be four layers between the participant and the company supposedly worth $1 billion.

Calling the final number “daily NAV” doesn’t create a daily market for the company.

---

The stable-value history makes the inconsistency glaring

In 2004, SEC staff challenged a structure consisting largely of market-priced bonds because it questioned how the relatively small insurance-wrap component was being valued.

Today we’re discussing putting:

private companies

private loans

private real estate

and potentially other difficult-to-value assets inside retirement products.

And rather than forcing all of them through the old mutual-fund transparency standard, the industry increasingly has another option:

Don’t use a mutual fund.

Use a CIT.

And if one state CIT regime is inconvenient?

Choose another state.

---

Follow the contract, not the asset class

The industry debate keeps asking:

Should 401(k) participants have access to private equity?

That’s almost the wrong question.

Ask instead:

Why can’t today’s predominant private-equity contract comfortably survive inside an SEC-registered mutual fund?

Then ask:

What has to be changed to make that same contract fit inside an OCC-regulated CIT?

Then:

What has to change under Pennsylvania’s detailed CIT rules?

And finally:

What has to change if the top-level target-date CIT is governed by a Nevada-chartered trust company?

If the answer gets progressively closer to “nothing,” we may have identified the real attraction.

---

A CommonSense 401(k) Test

Before any private-equity, private-credit, annuity or private-real-estate product enters a 401(k) TDF, every fiduciary should ask one very simple question:

Could this exact contract survive inside an SEC-registered mutual fund?

Not a sanitized version.

Not 2% exposure through an interval fund.

Not an entirely different registered wrapper.

This contract.

Same fees.

Same leverage.

Same GP valuation.

Same liquidity.

Same gates.

Same carry.

Same side letters.

Same affiliated transactions.

Same accounting.

If the answer is no, the next question shouldn’t be:

Which state-regulated CIT can we use instead?

It should be:

Why isn’t it good enough for an SEC mutual fund but good enough for somebody’s 401(k)?

The SEC’s standards have already moved far enough that a daily-liquid mutual fund can obtain exposure to private loans and private buildings through model-valued, limited-liquidity underlying funds.

Apparently that still isn’t flexible enough for the private-equity industry.

And the migration toward state-regulated target-date CITs may tell us more about the future of 401(k)s than all the industry’s talk about “democratizing” private markets combined.

Appendix — The October Intel Case Just Got Bigger

The Supreme Court’s Anderson v. Intel case could determine how difficult it is for 401(k) participants to challenge complicated target-date investments. Intel argues that plaintiffs challenging investment performance need a sufficiently comparable “meaningful benchmark.” The Court granted review in January and the merits briefing is now substantially underway.

That becomes increasingly problematic as target-date funds move beyond ordinary stocks and bonds into private equity, private credit, annuities and other difficult-to-value investments. Great Gray’s Panorix target-date CIT, for example, is expressly designed to incorporate private equity and private credit, while Nuveen’s Pennsylvania-regulated Lifecycle Income CIT embeds TIAA’s Secure Income Account annuity.

The participant may see a simple “Target Date 2050” fund, while underneath could be CITs, private funds, insurance contracts, GP valuations, leverage and multiple layers of fees.

That creates an obvious problem with the meaningful-benchmark requirement:

The more complicated and opaque Wall Street makes the investment, the harder it becomes for a participant to find the supposedly perfect comparable fund.

Indeed, an amicus brief supporting the Intel participants specifically argues that private equity and hedge funds are unusually opaque and difficult to monitor and value.

Don’t Let Opacity Become a Legal Defense

Before requiring a participant to produce the perfect benchmark, require the fiduciary to produce the information necessary to construct one:

Show the contract. Show the fees. Show the leverage. Show the valuation methodology. Show the affiliated transactions. Show the liquidity restrictions.

Then we can talk about benchmarks.

The Supreme Court should be very careful not to create a perverse rule under which the more opaque and complicated a 401(k) investment becomes, the harder it becomes to sue the fiduciaries who selected it.

Complexity should increase fiduciary diligence—not decrease fiduciary accountability.

Who Regulates Your 401(k) CIT? BlackRock, Goldman, Prudential and Lincoln Lead Back to Las Vegas

Many Retirement Plans Still Put Wall Street Over Participants- SCOTUS Intel case key

ERISA Investment Standards Should Be Higher Than Mutual-Fund Standards —Not Lower