The two most important investigative stories this year involving Leon Black, Apollo Global Management, and Jeffrey Epstein did not come from major American newspapers.

They came from foreign-owned media organizations.

First came the explosive Financial Times investigation, which uncovered new Epstein-related files tied to Apollo leadership. That reporting became serious enough that the American Federation of Teachers filed a formal SEC complaint against Apollo citing the FT revelations and demanding an investigation into whether investors were properly informed. AFT SEC Complaint Letter

Then came the sweeping new Guardian investigation detailing additional allegations surrounding Black, Epstein victims, and legal pressure tactics.

Again, not an American newspaper.

That is not a coincidence.

The obvious question is:

Why are some of the biggest stories involving Apollo, Epstein, public pensions, and Wall Street secrecy being broken by non-U.S. media organizations while American state-capital newspapers remain largely silent?

The answer may lie in Apollo’s extraordinary financial and political influence over the very pension systems these local newspapers are supposed to investigate.

Apollo just announced it had surpassed $1 trillion in assets under management. A few years ago, Apollo publicly acknowledged that roughly 75% to 80% of its capital came from public pensions and similar institutional pools. If even a rough estimate is applied to those numbers, the scale becomes staggering.

If Apollo controls approximately $750 billion sourced from public pensions and extracts fee structures approaching 4% across private equity, private credit, real estate, infrastructure, insurance, and related vehicles, that implies roughly $30 billion annually flowing from pension beneficiaries to Apollo and affiliated Wall Street firms.

Most of these arrangements occur through secret no-bid contracts shielded from public scrutiny.

Now consider where public pension oversight traditionally occurs in America.

Not at the national media level.

Public pension oversight is usually handled by regional newspapers located in state capitals:

• The Columbus Dispatch
• Tallahassee Democrat
• Springfield IL State Journal-Register
• Austin American-Statesman
• The Indianapolis Star
• Des Moines Register
• The Topeka Capital-Journal
• Lansing State Journal
• The Jackson Clarion-Ledger
• The Providence Journal

These papers are tied to Gannett — a company whose debt structure has long been associated with Apollo-linked financing influence.

That reality creates an uncomfortable but unavoidable question:

Can newspapers aggressively investigate the pension relationships that financially support the same Wall Street ecosystem controlling or influencing their own debt structures?

Even if there is no explicit editorial interference, the structural conflict is obvious.

A newspaper chain drowning in debt and dependent on Apollo-linked financing has little institutional incentive to launch aggressive investigations into Apollo’s relationships with public pensions, state politicians, consultants, and pension trustees.

I believe this is a deliberate influence over profit strategy, like Jeff Bezos and the Washington Post, the Ellisons and CBS. 

The silence becomes even more striking given the magnitude of the Epstein story.

Imagine if a major oil company, firearms manufacturer, or politically disfavored corporation faced:

• Senate investigations
• SEC complaints
• shareholder lawsuits
• survivor allegations
• Repeated Epstein revelations
• allegations involving billionaires and trafficking networks

The coverage would be relentless.

Yet Apollo continues receiving comparatively soft treatment from much of the American financial and regional press despite managing retirement assets for millions of teachers, firefighters, police officers, and state workers.

That raises a broader issue far beyond Apollo itself.

America’s local newspaper industry increasingly appears financially intertwined with the same Wall Street private equity ecosystem that dominates public pensions.

The result may not require overt censorship. Structural dependence alone can shape coverage decisions. Editors know where the financial pressure points are. Publishers understand who controls financing markets. Reporters recognize which investigations are institutionally welcome and which are not.

This may explain why some of the most important reporting involving Apollo and Epstein is now emerging from organizations outside the American corporate media structure.

The Financial Times and The Guardian are not financially embedded inside the same state-pension/local-media/private-equity nexus to the same extent as many U.S. regional newspaper chains.

That independence matters.

It also exposes a deeper problem with public pensions themselves.

Public pension systems increasingly allocate hundreds of billions into opaque private markets while the local media institutions tasked with oversight are simultaneously weakened, indebted, consolidated, or financially connected to the same Wall Street firms benefiting from the pension money.

The watchdogs become dependent on the system they are supposed to investigate.

Meanwhile, retirees bear the risks.

Teachers and state workers are told these private equity relationships are sophisticated, diversified, and professionally managed. Yet they are rarely told:

• the true fee structures
• the political influence networks
• the debt relationships
• the hidden contracts
• the valuation secrecy
• or the growing reputational risks tied to firms like Apollo

The Epstein issue is no longer merely about one billionaire.

It is becoming a case study in how concentrated financial power can influence pensions, media, politics, and public accountability simultaneously.

And the fact that the biggest stories are now being broken by foreign newspapers may be the clearest warning sign of all.

State Pensions with Apollo protected by Gannett Newspapers.

Florida State Board of Administration Apollo PE funds IV, V PC Accord V and VI

Illinois Teachers Retirement System Apollo PE funds X

Illinois Municipal Apollo Credit Wilshire

Indiana Public Retirement System (INPRS) Apollo Origination Partnership

Iowa Public Employees Retirement System, Apollo PE funds Wilshire

Kansas Public Employees Retirement System Apollo PE funds VIII,IX

Michigan RS  Apollo Investment fund VIII, IX  Hybrid Value Funds, Credit/ Opportunistic Credit

Mississippi PRS Apollo VIII IX Private Equity funds

Rhode Island Retirement System Apollo PE VIII, IX

Texas County & District  PE fund X

Texas ERS  Apollo Credit Strategies

Texas Municipal   Fund VIII

Texas TRS Teachers’ Retirement  Apollo PE funds

The case for public pensions to divest from Apollo Global Management because of its ties to Leon Black and Jeffrey Epstein just became substantially stronger.

For years, defenders of Apollo have argued that the Epstein controversy was old news. Black resigned as CEO in 2021. Apollo moved on. Investors should move on too.

But the new Guardian investigation published this week shows the scandal is not over. It is still evolving. New allegations, new reporting, new legal controversies, and new scrutiny continue to emerge years after Black supposedly separated himself from the firm. The article transforms this from a “historical reputational issue” into an ongoing governance and fiduciary problem for every pension system still invested with Apollo.  https://www.theguardian.com/us-news/ng-interactive/2026/may/06/jeffrey-epstein-leon-black

The Guardian reports allegations that Black’s legal team privately communicated with a federal judge in connection with efforts to undermine an Epstein victim’s compensation award. Whether or not additional legal findings ultimately emerge, the significance for pension fiduciaries is obvious: the controversy surrounding Apollo’s founder is not fading away. It is expanding.

The issue is no longer simply that Black paid Epstein enormous sums after Epstein was already a convicted sex offender. The issue is that new layers of the story continue unfolding years later, creating continuing reputational, legal, and financial risks for institutional investors tied to Apollo.

That matters enormously for public pensions.

State pension systems routinely lecture corporations about governance, ethics, ESG, transparency, and reputational risk. Many have divested from tobacco, firearms, fossil fuels, Russia, Sudan, and private prisons. Yet these same pension systems continue allocating billions to Apollo while a growing stream of investigations, shareholder litigation, Senate inquiries, survivor allegations, and media exposés continue to surround the firm’s founding leadership.

At some point fiduciaries must explain why ESG principles apply to oil pipelines in Texas but apparently do not apply to relationships tied to Jeffrey Epstein.

The Guardian article also reinforces the credibility of Senator Ron Wyden and his ongoing investigation into Leon Black’s payments and relationships tied to Epstein. Wyden has already raised questions involving possible hush-money arrangements, surveillance activities, and unexplained financial flows connected to Epstein’s operations. https://www.finance.senate.gov/imo/media/doc/wyden_letter_to_doj-treasury-fbi_on_epsteinpdf.pdf

The complaint to the SEC from the AFT and AAUP on Apollo lying about Marc Rowan and more involved ties with Epstein is still outstanding. https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf

  The Guardian investigation now adds another layer of scrutiny involving alleged legal pressure tactics and continuing litigation involving Epstein victims.

Public pensions can no longer dismiss this as a fringe activist concern or isolated media sensationalism. The concerns now involve:

• U.S. Senate investigations
• shareholder lawsuits
• SEC pressure from major unions
• continuing victim litigation
• repeated major-media investigations
• expanding reputational fallout

This becomes especially important because Apollo is not merely another Wall Street manager. Apollo is deeply embedded throughout the U.S. public pension system. Many pension systems have allocated billions into Apollo private equity, private credit, real estate, infrastructure, insurance-related products, and Athene-connected strategies. In many cases these same pension systems simultaneously proclaim commitments to governance oversight and stakeholder responsibility.

The contradiction is becoming impossible to ignore.

The financial implications are also growing. Apollo already faces stock-drop litigation connected to allegations that investors were not fully informed about Epstein-related risks. Continued investigations increase the possibility of additional litigation, regulatory scrutiny, fundraising pressure, and institutional backlash.

This is no longer simply an ethical issue. It is a material risk-management issue.

Institutional investors constantly claim that governance failures can create long-term financial damage. If pension systems truly believe that principle, then Apollo deserves heightened scrutiny. Governance risk is investment risk.

The Guardian story also undermines perhaps the most common defense used by Apollo supporters: that Leon Black is no longer CEO and therefore the issue is resolved.

That argument becomes weaker every month. Black remains inseparable from Apollo’s history, culture, and identity. Apollo’s rise was built under his leadership. The continuing revelations surrounding Epstein repeatedly pull Apollo back into the story regardless of formal titles or organizational charts.

The broader danger for pensions is that they are beginning to look selective and hypocritical in how they apply fiduciary standards. Pension systems aggressively police reputational risk when politically convenient, but appear far more tolerant when the investments involve elite private equity firms generating lucrative relationships, consultant fees, political access, and headline return numbers.

That double standard is becoming increasingly visible.

For pension trustees, the question is becoming straightforward:

How many more investigations, lawsuits, Senate inquiries, media exposés, and victim allegations must emerge before Apollo’s Epstein ties are finally considered a material fiduciary concern?

Because if this does not qualify as a governance red flag, it is difficult to imagine what possibly would.

List of Plans with Apollo Funds

Alaska Permanent Fund Apollo PE funds

Arizona PSPRS Apollo PE funds

California Public Employees’ Retirement System (CalPERS) Apollo Investment Fund VI and related vehicles

California State Teachers’ Retirement System (CalSTRS) Apollo Investment Funds VI, VII, IX, X; Hybrid Value II

Chicago Teachers Pension Fund 2024 performance confirms Apollo PE/PC as manager

Colorado PERA Apollo Investment Funds III,IV,V,VI, VII, Distresssed DIF

Colorado School  Apollo Credit Opp III  & DIF

Connecticut Retirement Plans & Trust Funds Apollo Investment Fund VIII

Florida State Board of Administration Apollo PE funds IV, V PC Accord V and VI

Georgia Teachers Retirement System

Idaho PERSI Apollo PE funds

Illinois Teachers Retirement System Apollo PE funds X

Illinois Municipal Apollo Credit Wilshire

Indiana Public Retirement System (INPRS) Apollo Origination Partnership

Iowa Public Employees Retirement System Apollo PE funds Wilshire

Kansas Public Employees Retirement System Apollo PE funds VIII,IX

Kentucky  Teachers Apollo REIT & Apollo Stock

Los Angeles City Employees’ Retirement System (LACERS) Apollo PE funds VI

Los Angeles (CA) Water and Power has PE fund X

Louisiana Teachers’ Retirement System of Louisiana (TRSL), Apollo Credit, Natural Resources

Maryland State Retirement & Pension System ?PE funs

Massachusetts PRIM Apollo PE funds

Michigan RS  Apollo Investment fund VIII, IX  Hybrid Value Funds, Credit/ Opportunistic Credit

Minnesota State Board of Investment Apollo/Athene Dedicated Investment Program II

Mississippi PRS Apollo VIII IX Private Equity funds

Montana Board of Investments Stock holdings?

Nebraska Investment Council  India Property Fund II LLC.

New Hampshire Retirement System  Apollo PE funds

New Jersey Division of Investment: Stock holdings?

New Mexico State Investment Council Apollo PE VII, VIII PC 

New York City Teachers’ Retirement System  Apollo PE funds

New York City (NY) ERS PE $500mm 2013

New York City (NY) Police PE fund VI

New York State  Apollo PE VIII 

North Carolina Retirement Systems Apollo PE funds VI, VII

Ohio Highway Patrol SHPRS: Apollo PE funds

Ohio SERS: “Core Farmland Fund, LP Wilshire

Ohio State Teachers Retirement (STRS)  PE Apollo S3 Equity Hybrid Solutions

Ohio Public OPERS Apollo PE funds, Oregon Public Employees Retirement Fund (OPERF), Apollo PE VI, VII, VIII, IX.

Oregon PER recently comitted $300mm to Apollo distressed debt fund as well as earlier funds like Apollo PE IX

Pennsylvania PSERS Apollo PE funds IV  $620mm

Pennsylvania SERS Apollo PE funds VI- VIII

Rhode Island Retirement System Apollo PE VIII, IX

San Diego City Employees Retirement System Apollo PE funds

San Francisco (SFERS) San Francisco Employees’ Retirement System Apollo PE funds Wilshire

South Carolina RS $750mm

South Dakota Retirement System Apollo PE funds

Texas County & District  PE fund X

Texas ERS  Apollo Credit Strategies

Texas Municipal   Fund VIII

Texas TRS Teachers’ Retirement  Apollo PE funds

Tennessee Consolidated Retirement System Stock holdings?

San Francisco Employees’ Retirement System Apollo PE funds

San Diego City Employees’ Retirement System  Apollo PE funds

University of Calfiornia PE VII, VIII  Principal  Wilshire

Virginia Retirement System Apollo PE funds

Washington State Investment Board (WSIB) Apollo S3 Equity & Hybrid

Australian Super Funds with Apollo – Hostplus, Care Super, Catholic Super-Equip Super. Micheal West/Cliona O’Dowd

There is a simple truth the retirement industry does not want plan sponsors, participants, or courts to confront:

Despite all the hype we hear from the Private Equity-controlled Department of Labor, PE-controlled Congress, and the PE-controlled or influenced media, that this is a done deal and coming

Private Equity in 401(k) plans is illegal in many cases under ERISA’s prohibited transaction rules.

Not “risky.”
Not “complex.”
Illegal.

And yet it is rapidly being inserted into target date funds, Collective Investment Trusts (CITs), and so-called “diversified” portfolios.

How?

Through secrecy, accounting manipulation, and regulatory arbitrage.  https://commonsense401kproject.com/2026/03/06/is-private-equity-illegal-in-your-pension/

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1. The Core Legal Problem: ERISA Prohibited Transactions

ERISA is not vague on this.

It prohibits transactions between a plan and a party in interest unless strict exemptions apply. Private equity structures routinely violate this framework:

• Undisclosed fee layers (2 and 20, monitoring fees, transaction fees)
• Revenue sharing and cross-payments
• Affiliated service providers (recordkeepers, consultants, PE sponsors)
• Self-dealing through vertically integrated platforms

As laid out in your prior piece “Private Equity as an ERISA Prohibited Transaction”, once fully disclosed, many of these arrangements would fail fiduciary scrutiny immediately.  https://commonsense401kproject.com/2025/10/27/private-equity-as-an-erisa-prohibited-transaction/  

That is precisely why full disclosure never happens.

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2. The Secrecy Model: If You Can’t See It, You Can’t Challenge It

The industry’s entire defense rests on one premise:

Participants and fiduciaries are never given the information needed to evaluate legality.

This issue is front and center in the Supreme Court’s pending case involving Intel Corporation.

As you’ve written:

• The case is not really about benchmarking
• It is about access to information

If participants cannot see:

• Private equity contracts
• Fee arrangements
• Valuation methodologies
• Side letters

Then ERISA enforcement collapses.

You cannot challenge what you cannot see.

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3. The CIT Black Box: Regulatory Arbitrage in Action

Private equity cannot survive inside SEC-registered mutual funds because:

• Daily valuation is required
• Full fee disclosure is required
• Liquidity standards apply

So the industry created an end-run:

State-Regulated Collective Investment Trusts (CITs)

These vehicles:

• Avoid SEC oversight under the Investment Company Act of 1940
• Operate under weak state banking regulation
• Allow mixed accounting standards in a single portfolio
• Provide minimal transparency to participants

As highlighted in your “CIT Black Box” piece:   https://commonsense401kproject.com/2026/05/04/the-cit-black-box-bloomberg-gets-it-right-but-the-real-risk-is-even-bigger/

CITs can combine assets priced under four different accounting regimes.

This is not diversification.

It is accounting manipulation.

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4. The 25% Rule: The Legal Loophole That Isn’t

The industry often hides behind the so-called “25% test”:

• If less than 25% of a fund is “plan assets,”
• ERISA protections can be diluted or avoided

This rule was never intended to:

• Shield opaque private equity structures
• Enable hidden fee extraction
• Allow fiduciaries to bypass disclosure

Yet in practice, it is used to:

Convert ERISA-protected assets into unregulated capital pools

This is not compliance.

It is regulatory arbitrage.  Industry relies on captured Public pensions to fill the 75% non-ERISA potions

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5. Even Trustees Can’t See the Contracts

In one of the most telling real-world examples:

• I, as A Kentucky pension trustee of a $20 billion state plan, was denied access to private equity contracts

They did this because I would have shown that the contracts violated state fiduciary laws which are much weaker than ERISA

6. The Diversification Lie

Private equity’s biggest selling point is also its biggest fraud:

“It improves diversification.”

This claim is built on corrupted inputs:

• Artificially smoothed returns
• Manager-reported valuations
• Suppressed volatility
• Lagged pricing

As detailed in your diversification analysis:

• Correlation appears low because pricing is manipulated
• Risk appears low because losses are delayed or hidden

In reality:

• Private equity and private credit are often highly correlated to public markets
• But with worse liquidity, higher fees, and delayed losses

This leads to systematic overallocation in:

• Public pensions
• Target date funds
• 401(k) plans
• https://commonsense401kproject.com/2026/05/04/the-diversification-lie-how-private-equity-and-private-credit-use-corrupt-accounting-to-hijack-pension-and-401k-allocations/
•  

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7. The DOL’s Role: Enabler, Not Enforcer

Recent Department of Labor actions—particularly guidance and proposed rules—have:

• Opened the door to private equity in 401(k)s
• Deferred to weaker regulatory frameworks
• Avoided meaningful disclosure requirements

As you’ve argued: https://commonsense401kproject.com/2026/04/04/the-dols-fiduciary-rule-is-really-a-gift-to-wall-street-and-a-trap-for-plan-sponsors/

The DOL fiduciary rule has become a gift to Wall Street and a trap for plan sponsors.

Plan sponsors are being told:

• “It’s allowed”
• “It’s diversified”
• “It’s prudent”

But when litigation comes, they will face:

• Strict ERISA liability
• Without having ever seen the full picture themselves

The DOL has never enforced prohibited transactions with annuities, so basically, the 700 thousand plans under $100 million in assets,  are out of luck and will become victims.

The largest 8000 plans, those over $100 million in assets, will be attracting the litigation.   The largest 800 plans or so will probably avoid private equity in plans, as they have avoided annuities because of the litigation risk.   The media’s focus on the top 1/10^th of 1% of plans will probably help this stay under cover.

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8. Why This Fails ERISA – Plain and Simple

Private equity in 401(k)s often violates:

1. Duty of Loyalty

Hidden fees and conflicts benefit managers, not participants.

2. Duty of Prudence

Opaque, illiquid, and unpriceable assets cannot be prudently evaluated.

3. Prohibited Transaction Rules

Undisclosed compensation and affiliated dealings trigger violations.

4. Disclosure Requirements

Participants are denied material information.

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9. The Bottom Line

Private equity in 401(k)s survives not because it is legal—

But because:

• Contracts are hidden
• Fees are obscured
• Risks are mispriced
• Regulators look away
• Courts are denied the evidence

And most importantly:

Participants are kept in the dark.

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10. The Coming Reckoning

If courts—starting with the Supreme Court of the United States—force disclosure:

• Private equity structures will be exposed
• Prohibited transaction claims will follow
• Fiduciary defenses will collapse

At that point, the question will no longer be:

“Is private equity appropriate in a 401(k)?”

It will be:

How was this ever allowed in the first place?

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Private Equity in 401(k)s is not a gray area.
It is a black box built to avoid the law.

And once the box is opened—
The entire structure falls apart.

Wall Street’s biggest sales pitch is simple:

Private Equity and Private Credit reduce risk through diversification.

That claim is not just misleading.

It is built on an accounting distortion that systematically understates risk and overstates diversification benefits.

And now, with the Department of Labor’s blessing, that same flawed model is being pushed into 401(k) Target Date Funds through opaque Collective Investment Trusts (CITs).

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The Illusion: Lower Volatility, Lower Correlation, Better Portfolios

Every pension consultant presentation shows the same chart:

• Higher returns
• Lower volatility
• Lower correlation

A “free lunch.”

But that “free lunch” depends entirely on how the assets are valued—not what they actually are.

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Volatility Is Not Lower — It Is Hidden

Private assets appear stable because they are not priced in real time.

• Public stocks → priced continuously
• Private equity → valued quarterly using models
• Private credit → priced internally
• Real assets → appraised with lag

This creates what academics call “volatility laundering.”

• Returns are artificially smoothed
• Risk is understated
• Drawdowns are delayed

As one analysis notes, smoothing can make volatility look ~10% when the true economic volatility is closer to 30%

Another study shows private equity valuations are updated infrequently and rely on assumptions, creating artificially smooth return patterns

This is not a small technical issue.

It is the foundation of the entire diversification narrative.

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Correlation Is Also Fake

Risk models rely on correlation—how assets move relative to each other.

But when returns are smoothed:

• Price movements are delayed
• Volatility is dampened
• Correlation appears artificially low

Academic research confirms:

• Smoothing reduces measured correlation and beta
• Makes private assets appear less tied to public markets
• Overstates diversification benefits

When returns are “unsmoothed,” correlation rises and volatility increases significantly

Even real estate studies show appraisal-based pricing can create near-zero volatility and correlation that simply do not exist economically

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The Model Breakdown: Garbage In, Garbage Out

Portfolio construction models—mean-variance optimization, Monte Carlo simulations—depend on:

• Standard deviation (volatility)
• Correlation

If both are artificially low:

👉 The model forces higher allocations to those assets

That is exactly what has happened:

• Public pensions now allocate 20%–40%+ to Private Equity and Private Credit
• Risk models “justify” it
• Consultants recommend it
• Staff bonuses depend on it

But the inputs are corrupted.

So the outputs are inevitable:

Systematic overallocation to mispriced, illiquid, opaque assets

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This Is Not Diversification — It Is Delay

Private assets don’t avoid volatility.

They delay recognizing it.

Instead of:

• Immediate mark-to-market losses

You get:

• Slow, staged write-downs
• “Stable” performance… until it isn’t

As research shows, smoothing can reduce observed drawdowns from ~40% reality to ~12% reported levels

That is not diversification.

That is accounting deferral of losses.

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Enter the DOL: Bringing the Distortion into 401(k)s

Your prior work correctly identifies the next phase:

• The DOL rule enables these same assets in 401(k)s
• CITs allow mixing multiple accounting regimes
• Target Date Funds become the delivery vehicle

Inside a single TDF, you now have:

• Daily-priced public equities
• Quarterly private equity marks
• Model-based private credit
• Book-value annuities

Four incompatible accounting systems in one fund   https://commonsense401kproject.com/2025/08/12/4-sets-of-books-how-trumps-401k-push-opens-the-door-to-accounting-chaos/

This is not diversification.

This is accounting chaos by design.   https://commonsense401kproject.com/2026/04/03/dol-401k-fiduciary-rule-enables-accounting-fraud/

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CITs: The Black Box That Makes It Possible

Unlike mutual funds, CITs:

• Avoid SEC transparency
• Operate under weak state regulation
• Allow hidden alternative exposures
• Enable discretionary valuation

They are the perfect container for:

• Private Equity
• Private Credit
• Annuities
• Structured products

And most importantly:

👉 They allow the accounting differences to remain hidden

The CIT Black Box: Bloomberg Gets It Right — But the Real Risk Is Even Bigger

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Why This Is Dangerous in 401(k)s

Public pensions at least have:

• Investment staff
• Consultants
• Governance structures

401(k) participants have none of that.

They get:

• Defaulted into Target Date Funds
• With no visibility into underlying assets
• And no understanding of the risks

Yet those risks are:

• Higher leverage
• Lower liquidity
• Concentrated credit exposure

And critically:

👉 Mis-measured risk

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The Endgame: When Smoothing Fails

This system works as long as:

• Markets rise
• Valuations are stable
• Liquidity holds

But when stress hits:

• Private valuations catch up
• Correlations spike toward 1
• Losses appear suddenly

And the “diversification” disappears overnight.

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Bottom Line

Private Equity and Private Credit do not deliver diversification the way they are marketed.

They deliver:

• Artificially low volatility
• Artificially low correlation
• Artificially high allocations

All driven by accounting practices that smooth, delay, and obscure reality.

And now, through DOL policy and CIT structures, that same flawed model is being embedded into the core of the U.S. retirement system.

Call it what it is:

Diversification built on accounting fiction.

The recent Bloomberg investigation into Collective Investment Trusts (CITs) is one of the most important mainstream pieces written on the retirement system in years. It confirms what many of us have been documenting: trillions of dollars are migrating into vehicles that are cheaper on the surface—but structurally opaque, fragmented, and increasingly unaccountable.

But even this excellent reporting only scratches the surface of the real risk.

https://www.bloomberg.com/news/features/2026-05-03/trillions-in-us-retirement-dollars-flow-into-opaque-trusts-that-rival-etfs?      But it goes beyond identifying the problem that the WSJ did late last year https://commonsense401kproject.com/2025/12/07/wall-street-journal-exposes-target-date-cit-corruption-but-theyve-only-scratched-the-surface/

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1. Bloomberg Identifies the Problem — But Understates the Danger

Bloomberg correctly highlights three critical facts:

• CITs now rival mutual funds in size (roughly $6–$7 trillion)
• No regulator has a complete view of the market
• Disclosure is fragmented across federal and state banking regimes

That alone should be alarming.

But here’s the key escalation:

This isn’t just opacity — it’s the perfect structure for mispricing, hidden risk, and potentially systemic accounting manipulation.

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2. The Real Fault Line: Alternatives + Annuities Inside CITs

Your lead observation goes directly to the core issue:

“The ones doing accounting fraud are alternatives and annuities buried in target date funds in state-regulated CITs.”     https://commonsense401kproject.com/2026/04/03/dol-401k-fiduciary-rule-enables-accounting-fraud/

That’s exactly where the system breaks.

Why?

• Private Equity & Private Credit
  • No daily pricing
  • Manager-controlled valuations
  • Smoothing of losses
• Insurance General Account / Annuity Structures
  • Opaque crediting rates
  • Spread-based profits hidden from participants
  • No transparent benchmark
• CIT Wrapper
  • No SEC registration
  • No standardized reporting
  • No public scrutiny

Put together:

You get institutional portfolios that look stable… because losses are not being recognized.

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3. The “Regulatory Arbitrage Stack”

Bloomberg hints at regulatory arbitrage. The reality is more severe — it’s layered:

Layer 1: Vehicle Arbitrage

• Mutual Fund → SEC regulated
• CIT → bank regulated (Office of the Comptroller of the Currency or state)

Layer 2: Jurisdiction Arbitrage

• Federal CITs → limited aggregated reporting
• State CITs → in some cases effectively secret

Layer 3: Asset Arbitrage

• Liquid public markets → price discovery
• Private markets → model pricing

Layer 4: Wrapper Arbitrage

• Target Date Funds → “diversified” label
• Reality → concentrated exposure to opaque assets

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4. Your Key Insight: The Risk Is Not in the Top 10

Bloomberg focuses on large managers like:

• BlackRock
• State Street
• Vanguard

But your point is more important:

The real danger is NOT the top-tier providers.

Likely Risk Hierarchy:

Safer (relatively):

• Mega plans (Top 500)
• Institutional platforms with scale, governance, and scrutiny

High Risk:

• Mid-tier plans ($100mm–$1B)
• Smaller plans (<$100mm)
• Insurance-dominated CITs
• State-regulated trusts with weak disclosure regimes

That’s where:

• Oversight is weakest
• Fiduciary expertise is limited
• Conflicts are highest

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5. Scale of Exposure: The “Silent Majority” Problem

You nailed the distribution problem:

• ~500 large plans → likely OK
• ~7,000 plans > $100M → mixed quality
• ~700,000 small plans → most at risk

This is critical:

Systemic risk is not concentrated at the top — it’s dispersed across thousands of under-resourced plans.

And those plans are exactly where:

• CIT adoption is accelerating
• Target Date Funds dominate menus
• Participants lack visibility

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6. The Private Markets Trojan Horse

Bloomberg correctly identifies the next phase:

CITs will be the primary gateway for private assets into 401(k)s

This is not a side issue — it is the strategy.

Why CITs are the chosen vehicle:

• No daily liquidity requirement
• Flexible valuation frameworks
• No public holdings disclosure
• Easier to embed complex structures

Translation:

If private equity and private credit enter 401(k)s at scale, it will happen through CITs — not mutual funds.

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7. The Missing Piece: Benchmark Failure = Legal Exposure

Bloomberg touches on disclosure — but the litigation angle is even stronger.

When you combine:

• Opaque pricing
• No consistent benchmarks
• Embedded insurance spreads
• Illiquid assets in “diversified” funds

You get:

A breakdown of the “meaningful benchmark” standard and potential ERISA prohibited transaction exposure.

This is exactly where your prior work connects:

• CITs as vehicles for prohibited transactions
• Hidden compensation through spreads and fees
• Fiduciaries unable to properly evaluate risk

State-Regulated Collective Investment Trusts (CITs) as Vehicles for ERISA Prohibited Transactions

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8. The Bottom Line

Bloomberg’s article is a major step forward. It establishes:

• The size
• The opacity
• The regulatory fragmentation

But the deeper conclusion is this:

CITs are not just a cheaper wrapper — they are becoming the central mechanism for moving opaque, illiquid, and hard-to-value assets into the U.S. retirement system without full transparency.

And the real risk is not theoretical.

It sits:

• In mid-sized and small plans
• In state-regulated trusts
• In target date funds
• In the intersection of private markets and insurance products
•  
• https://commonsense401kproject.com/2026/01/15/tiaas-target-date-funds-are-built-on-a-risk-illusion/

Employee Fiduciary in their DOL comments, calls for CIT transparency https://www.employeefiduciary.com/blog/dol-six-factor-prudence-rule-comment-letter?utm_campaign=42067499-q2_2026&utm_content=377212724&utm_medium=social&utm_source=linkedin&hss_channel=lis-8ns4OmB9RB

Kentucky is quietly becoming a new battleground in the national data center arms race  It’s about tax breaks, hidden subsidies, and who is really paying the bill.

At the center of this push: state legislative leadership, electric utilities, and institutional capital—including public pensions chasing “infrastructure” returns.

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The Legislative Playbook: Last-Minute Deals and Massive Subsidies

Start with Jason Nemes—House Majority Whip.

What happened in Kentucky is a textbook case of how major economic policy gets made:

• 2024–2025 bills (HB 8, HB 775) were initially unrelated to data centers
• Then—on the final day of the session—hundreds of pages were added
• Buried inside: sweeping data center tax breaks across all 120 counties

Even more striking:

• Sales tax exemptions on equipment can run 25–50 years
• Incentives mirror national trends where states compete in a race-to-the-bottom subsidy war

This isn’t normal policymaking. It’s legislative arbitrage—exactly the same playbook you’ve documented in private equity and annuities.

---

The Political Network: It’s Not Just Nemes

Nemes didn’t act alone. The push reflects coordinated leadership across Kentucky’s GOP supermajority:

• Robert Stivers
  • Publicly pushed Kentucky to become a data center/AI hub
• David Osborne
  • Represents areas targeted for data center siting
• Josh Bray & Steven Rudy
  • Sponsors of enabling legislation

Even more revealing:

• Bills were shaped with input from utilities and corporate lobbyists
• Tech companies like Google and Meta lobbied to expand incentives

And at the federal level:

• Thomas Massie has warned that federal policy could strip local control over data center siting, enabling large-scale projects with minimal oversight

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The Hidden Cost: Ratepayers and Communities

Kentucky lawmakers are now scrambling to deal with the consequences of what they passed:

• New bills aim to prevent data centers from shifting infrastructure costs onto ratepayers
• Concerns include:
  • Massive electricity demand
  • Water usage
  • Grid upgrades paid by the public

This mirrors what’s happening nationally:

• Data centers are now a top-tier political issue across multiple states
• Voters are pushing back over utility costs and environmental impact

In Oldham County:

• A hyperscale project sparked local backlash and a moratorium
• Estimated:
  • ~4,000 construction jobs
  • But only ~176 permanent jobs

That’s the classic economic development tradeoff:
Huge subsidies → minimal employment → long-term infrastructure burden

---

The Real Driver: Electricity + Financial Engineering

Data centers don’t go where innovation is.

They go where:

• Power is cheap
• Regulation is weak
• Subsidies are large
• Land is available

Kentucky checks all four boxes.

But here’s the part most political coverage misses:

👉 Data centers are fundamentally an energy arbitrage trade

• Utilities build infrastructure
• States subsidize capital costs
• Operators lock in long-term power access
• Investors harvest stable, utility-like returns

Sound familiar?

It’s the same model as:

• Private credit
• Infrastructure funds
• Insurance general accounts

---

Where Pensions Come In

exposed through:

A. Infrastructure Funds

• Blackstone (digital infrastructure + data centers)
• Brookfield Asset Management
• Digital Realty

B. Private Equity / Private Credit

• Financing:
  • Data center construction
  • Power infrastructure
  • Fiber networks

C. Real Estate (REITs and private vehicles)

• Hyperscale campuses treated as “core real estate”

---

The Kentucky Twist: Utilities + Politics + Pensions

Kentucky may be one of the clearest examples in the country of alignment between:

1. Legislators → pass last-minute incentives
2. Utilities (e.g., LG&E) → benefit from massive load growth
3. Data center developers → lock in subsidized infrastructure
4. Institutional investors (pensions) → supply capital

The result:

A closed-loop system where taxpayers subsidize infrastructure,
ratepayers fund expansion, and pensions book the returns.

---

“Kentucky didn’t just invite data centers—it rewrote the rules at the last minute to subsidize them.

The same public pensions chasing returns from these projects are the ones whose participants will pay higher utility bills to support them.

That’s financial engineering—funded by the public, for the benefit of private capital.”

• The Teachers’ Retirement System of the State of Kentucky
  committed $100 million directly into a data center fund (TA Digital)

Both major Kentucky systems—TRS and KPPA—have long-standing relationships with:

• Blackstone Inc.
• KKR & Co.

• Private equity firms including Blackstone and KKR are aggressively investing in data center infrastructure globally
• KKR alone has committed billions to data center platforms (e.g., Global Technical Realty)

Blackstone:Owns and finances hyperscale data center platforms globally

Kentucky teachers’ pensions are already investing directly in data centers, while state legislators are subsidizing those same projects.

At the same time, Kentucky’s other pension system is deeply tied to Blackstone and KKR—two of the largest global owners of data centers.

How Data Centers Can Raise Utility Prices in Kentucky (LG&E & KU)

1. The Basic Reality: Data Centers Are Massive, Continuous Power Loads

A single hyperscale campus can demand 100–400+ megawatts—comparable to a small city.
Unlike factories, this demand is:

• 24/7 (no off-peak relief)
• Highly concentrated geographically
• Growing rapidly with AI workloads

That forces utilities like Louisville Gas and Electric and Kentucky Utilities to build dedicated infrastructure, often on tight timelines.

---

2. The Cost Stack: What Has to Be Built

To serve one large data center cluster, LG&E/KU may need:

• New high-voltage transmission lines
• New substations
• Transformer capacity upgrades
• Grid reinforcement across regions
• In some cases: new generation capacity

These are multi-hundred-million to multi-billion dollar investments.

---

3. The Critical Issue: Who Pays for That Infrastructure?

Utilities recover costs through regulated rate structures approved by the Kentucky Public Service Commission.

In theory:

• The data center should pay for its incremental costs

In practice:

• Costs often get socialized across all customers

This happens through:

A. Rate Base Expansion

• Infrastructure is added to the utility’s “rate base”
• Utilities earn a guaranteed return (e.g., 9–10%)
• That return is collected from all ratepayers

👉 Translation:
Even if a data center is the reason for the build, everyone pays

---

B. Demand Risk Shifting

If a data center:

• Delays construction
• Scales back
• Or exits

The infrastructure remains—and:

Residential and small business customers absorb the stranded costs

---

C. Special Contracts & Discounts

To attract data centers, states often allow:

• Discounted electricity rates
• Tax exemptions on energy use
• Long-term fixed pricing deals

Result:

Revenue shortfalls are made up elsewhere in the rate structure

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6. The Hidden Driver: Load Growth Sounds Good—But Isn’t Always

Utilities often argue:

“Large customers help spread fixed costs and lower rates”

That can be true only if:

• The data center pays full cost
• Demand is stable
• Infrastructure is efficiently utilized

But with hyperscale centers:

• Buildouts are lumpy and oversized
• Timing mismatches create unused capacity
• AI demand is uncertain and cyclical

👉 Result: Overbuild risk → higher rates

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7. National Evidence (What’s Happening Elsewhere)

Across multiple states:

• Data center demand is driving rate cases and price increases
• Regulators are beginning to push back on:
  • Cost shifting
  • Special tariffs
  • Subsidized infrastructure

Kentucky is now entering that same phase—with legislation already being discussed to protect ratepayers from these costs.

---

“Data centers don’t just consume electricity—they reshape the entire cost structure of the grid.

In Kentucky, utilities build billions in infrastructure to serve a handful of hyperscale customers, and those costs don’t stay isolated—they flow through the rate base to every household and small business.

There is a simple reason you are not hearing about massive losses in public pensions right now:

Because no one involved gets paid if the truth comes out.

Behind the polished annual reports and carefully engineered benchmarks sits what may be the largest coordinated financial misrepresentation in modern pension history—hundreds of billions in unrecognized losses in Private Equity and Private Credit.

---

The Market Has Already Spoken—Pensions Are Ignoring It

6

In recent weeks, real pricing has started to leak out:

• Publicly traded private credit funds are trading at ~75–80 cents on the dollar
• Secondary markets for private equity show material discounts
• Even insiders have acknowledged loans in weaker portfolios marked in the mid-70s

That is market pricing.

Yet public pension reports still show:

• Private credit: ~95–100 cents
• Private equity: flat or positive returns

This is not a timing issue.

This is a valuation regime designed to avoid reality.

---

The Scale of the Problem: $300–$500 Billion in Hidden Losses

Start with a simple framework:

• U.S. public pensions: ≈ $6 trillion
• Allocation to Private Equity + Private Credit: ~20–25%
• Total exposure: ≈ $1.2–$1.5 trillion

Now apply observable market discounts:

Asset	Exposure	Realistic Discount	Implied Loss
Private Credit	~$400B	20–30%	$80B–$120B
Private Equity	~$900B	25–40%	$225B–$360B

Total hidden losses: $300B to $500B

And that is a conservative estimate.

---

Why These Losses Are Not Being Recognized

Because the system is built to delay loss recognition.

Private assets are:

• Level 3 (model-based) valuations
• Marked by the same firms that earn fees from them
• Rarely subjected to real transactions

This allows:

• Smoothing of returns
• Lagging write-downs by years
• Artificial “outperformance” vs public markets

In other words:

If you don’t trade it, you don’t have to price it.     https://commonsense401kproject.com/2026/04/08/why-the-private-credit-meltdown-may-take-a-while/

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The Incentive Structure: Everyone Gets Paid to Pretend

This is where the story moves from negligence to something far more troubling.

Private Equity and Private Credit Firms (2 and 20)

• Fees are based on reported NAV and performance
• Lower valuations = lower fees

If assets were marked honestly:

• Performance fees would fall dramatically

Estimated impact:

• $60 billion to $100 billion in lost performance fees by PE firms

---

Pension Staff

• Bonuses tied to reported returns
• “Outperformance” often based on non-investable benchmarks

If losses were recognized:

• Bonuses collapse
• Career narratives collapse

Estimated impact:

• Hundreds of millions in staff compensation

That is currently way above private market levels.  https://commonsense401kproject.com/2026/05/02/ohio-strs-investment-staff-paid-excessively-to-look-the-other-way/

I also believe that since Citizens United the Private Equity industry has found a way to enrich state level officials via dark money that appoint and control pension board members as evidenced by huge increase in Private Equity in secret no-bid contracts. 

---

The Quiet Alignment of Interests

This is not a conspiracy in the traditional sense.

It is something more durable:

A perfectly aligned incentive system

Group	Incentive
Private Equity	Keep valuations high
Private Credit	Avoid defaults/write-downs
Pension Staff	Preserve performance and bonuses
Consultants	Captured by staff some even owned by PE

No one benefits from recognizing losses.

So losses are not recognized.     https://commonsense401kproject.com/2025/12/11/how-americas-largest-pension-consultants-became-the-distribution-arm-for-private-equity/

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The “Artificial Alpha” Machine

This is how the illusion works:

1. Private assets are not marked to market
2. Benchmarks are lagged or custom-built
3. Reported returns appear stable
4. Bonuses and fees are paid
5. Losses are deferred into the future

This creates what can only be described as:

Manufactured outperformance

State Pension staff and Private Equity/Credit are tied in numerous ways.  For example with Jeffrey Epstein linked Apollo they stick with them through scandals   https://commonsense401kproject.com/2026/04/17/apollo-divestment-case-for-jeffrey-epstein-ties-stronger-after-wyden-letter/      and will refuse to file stock drop claims. https://commonsense401kproject.com/2026/04/11/state-pensions-notably-absent-from-apollo-stock-drop-cases/

Public assets in Private Equity and Private Credit funds allow them to put up to 25% of the fund in ERISA assets without ERISA level transparency and disclosures, hiding billions in fees for 401k and other private sector pension assets.

---

The Dangerous Endgame

The risk is not just accounting.

It is liquidity.

If pensions ever need to:

• Rebalance
• Pay benefits during stress
• Or sell assets

They will discover:

• The market price is far below reported value
• Losses materialize instantly

This is how a slow-motion accounting problem becomes a sudden funding crisis.

---

The Parallel to 2008—But Worse

In 2008:

• Banks marked assets too slowly
• Losses eventually forced into the open

Today:

• Pensions don’t face daily liquidity pressure
• Losses can remain hidden much longer

Which means:

The eventual adjustment could be larger.

---

The Bottom Line

Public market signals are clear.

Private market accounting is not.

Between the two sits a gap of:

$300 billion to $500 billion in unrecognized pension losses

And behind that gap sits:

• $60–$100 billion in private equity and private credit fees
• Hundreds of millions in pension staff bonuses

All dependent on one thing:

Not marking assets to reality.

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Final Thought

This is not just a valuation issue.

It is a fiduciary issue.

Because when losses are hidden:

• Participants are misled
• Risks are understated
• Decisions are distorted

And eventually—

Someone else pays the price.

As a CFA charterholder in investments, I have no problem paying a premium of 20%-50% over an accountant or a CPA.  However, at the Ohio State Teachers’ Retirement it is in a different League.  The Average investment staffer at $180,693 makes 101% of the average accounting staffer at $89,686.  The Chief Investment Officer at $913,909 makes 371% of the Chief Financial officer at $193,933.

Ohio STRS has a long and sordid relationship with Jeffrey Epstein-linked Apollo, but chooses to look the other way. https://commonsense401kproject.com/2026/02/23/epstein-apollo-and-ohio-teachers-billions/   https://commonsense401kproject.com/2026/04/17/apollo-divestment-case-for-jeffrey-epstein-ties-stronger-after-wyden-letter/

These salaries at 2x to 6x do not reflect the Private Market but a corrupt system in which investment employees are demanding and getting higher compensation to look the other way at corruption. Columbus OH, has a lower-than-average cost of living.  https://commonsense401kproject.com/2025/10/31/columbus-the-highest-public-salaries-in-america-and-ohio-teachers-are-paying-for-it/

Typical Ratio CFA to CPA pay differential in Private Sector (Apples-to-Apples)

• Early career: ~1.2x – 1.5x
• Mid career: ~1.3x – 2x
• Senior roles: ~1.5x – 2.5x

STRS hired a corrupt Governance Consultant, GCA to make false claims about market equivalents.

The people who control opaque investments are paid multiples of those responsible for verifying them.

---

The Numbers: CFA vs CPA in Ohio Pensions

Let’s strip this down to reality.

Investment Staff (CFA Track)

• Chief Investment Officer: $250k – $900k+
• Senior Investment Staff: $150k – $400k
• Investment Staff: $100k – $250k

Accounting / Audit Staff (CPA Track)

• CFO / Controller: $110k – $190k
• Senior Accountant: $70k – $110k
• Staff Accountant: $50k – $80k

---

Same System. Same Assets. Completely Different Pay Logic.

Inside the same pension systems:

• An investment officer can make 2x–4x a senior accountant
• A CIO can make 5x–10x the people responsible for financial controls

And here’s the part no one says out loud:

The CPA side is the only group even remotely positioned to challenge valuations, fees, and financial reporting.

---

Who Controls the Truth?

This is not just about compensation. It’s about control.

The CFA Side Controls:

• Private equity allocations
• Private credit portfolios
• Valuation inputs
• “Benchmark engineering”
• Performance narratives

The CPA Side Controls:

• Financial statements
• Audit trails
• Compliance checks
• Disclosure integrity

Now ask the obvious question:

Which side is incentivized—and paid—to ask hard questions?

---

Private Equity: Where the Money—and Incentives—Explode

This gap didn’t happen by accident.

It coincides almost perfectly with the explosion of:

• Private equity
• Private credit
• Illiquid “alternative” investments

These assets:

• Do not have transparent pricing
• Rely on manager-provided valuations
• Generate massive fee streams

And most importantly:

They require far less accountability when the people reviewing them are underpaid and structurally marginalized.

---

The Structural Problem

Ohio didn’t just create a pay gap.

It created a governance imbalance:

• The dealmakers are rewarded for growth and complexity and high secret fees for managers
• The watchdogs are underpaid and outgunned

That imbalance leads to predictable outcomes:

• Selection by secret no-bid contracts no RFP’s
• Weak internal challenge to valuations
• Limited scrutiny of private equity contracts
• Acceptance of “black box” returns
• Rising fees with little resistance

---

The Real Question: Is This a Feature, Not a Bug?

When you see a system where:

• The highest-paid employees control opaque investments
• The lowest-paid professionals verify them
• And the governing boards rely heavily on the former

You have to ask:

Is this structure designed to prevent oversight rather than enable it?

---

Why Ohio Teachers and Workers Should Care

Every dollar paid in:

• Excess fees
• Inflated valuations
• Underperforming private markets

…comes out of:

• Teacher pensions
• Public worker retirement security
• Taxpayer backstops

And yet:

The people positioned to detect those problems are paid like mid-level clerks.

Ohio media has focused on Les Wexner’s Epstein role, but there is another one.   https://commonsense401kproject.com/2026/02/19/ohios-epstein-blind-spot-while-wexner-dominates-headlines-apollos-leon-black-remains-in-shadows/

Apollos Leon Black is not getting looked at most likely because media giants like the Columbus Dispatch are controlled by Apollo. https://commonsense401kproject.com/2025/08/22/ohio-medias-complicity-how-a-fake-scandal-hid-the-real-teacher-retirement-system-corruption/

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A Simple Fix That No One Proposes

If Ohio were serious about fiduciary duty, it would:

1. Lower Pay of investment staff to match Columbus OH market norms.
2. Create independent valuation teams—not reporting to investment
3. Require third-party pricing for illiquid assets
4. Elevate CPA oversight to board-level authority

Instead, the system doubles down on the opposite.

This will not happen if Ramaswamy is elected Governor https://commonsense401kproject.com/2026/03/18/vivek-ramaswamy-private-equity-and-ohios-public-pensions/

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Bottom Line

Ohio pensions have made a choice:

Pay the people who create complexity and fees for Wall Street excessively —and understaff and underpay the people who question it.

Until that changes, nothing else will.

Misleading Claims of GIPS Compliance at Ohio STRS

Investment Policy Statements (IPS) are often described as a cornerstone of fiduciary prudence. Consultants, recordkeepers, and industry “experts” routinely recommend them. Yet in the 401(k) world, IPS documents are frequently weak, superficial, or conspicuously absent.

That is not an accident.  I suspect some many attorneys and consultants recommend that you do not have them at all to avoid accountability and liability.

Despite their importance, an IPS is not explicitly required under ERISA. That loophole has become a strategic escape hatch. Plan sponsors can claim adherence to fiduciary best practices while avoiding the discipline, transparency, and accountability that a robust IPS would impose.

The Illusion of Compliance

The industry line goes something like this:
“An IPS is a best practice, but not legally required.”

Translation: we’ll give you one if you ask—but don’t expect it to actually constrain anything.

In practice, most 401(k) plans fall into one of three categories:

1. No IPS at all – especially in small and mid-sized plans
2. Template IPS documents – boilerplate language, largely meaningless
3. Superficial IPS frameworks – broad principles, no enforceable standards

Only the largest “mega plans” tend to have detailed IPS documents—and even those often fail where it matters most.

Target Date Funds: The Black Box Problem

Today, target date funds (TDFs) dominate the 401(k) landscape, accounting for more than 50% of assets in many plans. They are marketed as diversified, professionally managed, and prudent.

But here’s the problem:
Most IPS documents do not look under the hood of target date funds.

Instead, they treat TDFs as a single “qualified default investment alternative” (QDIA) and stop there.

That is a massive blind spot.

A proper IPS should require that:

• Each underlying strategy within a TDF should be evaluated independently
• Each component is assessed for fees, liquidity, valuation, and conflicts
• Each investment complies with ERISA prohibited transaction rules
• Structure review if not a SEC-registered mutual fund, but a weak state-regulated CIT

Instead, what we see is the opposite:

• Private equity is embedded in TDFs with no disclosure standards
• Private credit exposures with opaque valuation
• Insurance products (annuities) are buried inside structures
• Fee layers that cannot be reconciled from participant disclosures

A weak IPS doesn’t just fail to detect these issues—it actively conceals them.    This coincides with the legal theory of meaningful benchmarks, which is used to block transparency.      https://commonsense401kproject.com/2026/01/20/why-the-meaningful-benchmark-standard-is-a-judicial-illusion-built-for-wall-street/

The Missing Standard: Prohibited Transactions

One of the most glaring omissions in most IPS documents is any meaningful discussion of ERISA prohibited transactions.

This is where the rubber meets the road.

If an investment:

• Involves a party in interest
• Includes undisclosed compensation (revenue sharing, spreads, shelf fees)
• Relies on opaque valuation or self-dealing

…it may violate ERISA’s core fiduciary rules.

Yet IPS documents almost never require vendors to certify that:

“Each underlying investment strategy is not an ERISA prohibited transaction.”

Why not?

Because forcing that statement would expose the economic reality of many products—particularly:

• General account and Separate Account annuities
• Private market vehicles embedded in CITs and TDFs
• Hidden strategies like Crypto

CALPERS: A Case Study in IPS Failure

In our 288-page report on CALPERS, we made a deliberate decision:

We did not even discuss the IPS.

Why?

Because it was effectively useless.

The document devoted roughly 40 pages to proxy voting—a topic with minimal financial impact on returns—while offering only superficial treatment of:

• Private equity
• Private credit
• Valuation methodology

Even worse, the IPS simply deferred to a separate “valuation policy.”

And that valuation policy? A rubber stamp.

It essentially states that CALPERS relies on manager-provided valuations—the very entities with the strongest incentive to overstate performance.

In other words:

• No independent pricing
• No market discipline
• No enforceable standards

Calling this a “policy” is generous. It is closer to a delegation of responsibility without oversight.

Why Weak IPS Documents Persist

The absence of meaningful IPS enforcement is not a coincidence. It serves multiple stakeholders:

1. Plan Sponsors

Avoid liability by maintaining plausible deniability:

• Our consultants said we did not need an IPS
• “We followed our IPS”
• Even if the IPS says nothing meaningful

2. Consultants

Preserve flexibility:

• No constraints on recommending high-fee or conflicted products
• No accountability for underlying structures

3. Recordkeepers and Vendors

Maintain opacity:

• Hide revenue streams (spreads, kickbacks, platform fees)
• Bundle products that would fail scrutiny individually

4. Asset Managers

Avoid scrutiny of:

• Private market valuations
• Illiquid investments
• Complex fee structures

A real IPS would disrupt all of this.

What a Real IPS Should Do

A legitimate Investment Policy Statement should:

• Drill into underlying holdings, not just superficial products like Target Date
• Require transparent, market-based valuation standards
• Explicitly prohibit undisclosed compensation structures
• Mandate analysis of liquidity and credit risk
• Require certification of ERISA compliance at the strategy level
• Establish benchmarking based on investable alternatives

Most importantly, it should be enforceable.

Without enforcement, an IPS is just a document—useful for optics, useless for protection.

The Bottom Line

Investment Policy Statements in the 401(k) world are often presented as evidence of fiduciary discipline.

In reality, they frequently function as:

A shield for fiduciaries—and a blindfold for participants.

As target date funds continue to absorb the majority of retirement assets, the failure to scrutinize what lies beneath them becomes more dangerous.

A weak IPS doesn’t just fail to protect participants.

It enables the high risks and hidden costs that ERISA was designed to prevent.

Until IPS documents require real transparency—down to the underlying investments and their economic structure—the system will continue to operate in the shadows.

And that, more than anything, explains why so many in the industry prefer them weak—or not at all.

Investment Policy Statements Crucial to Fiduciary Duty

Wall Street Journal Exposes Target Date CIT Corruption — Opens up Fiduciary Litigation

Our upcoming report goes into detail on the CALPERS huge Governance failures due to conflicts of interest. https://pensionwarriorsdwardsiedle.substack.com/p/pension-fight-club-documentary-premiers

However, as a Progressive, I wanted to point out significant Environmental and Social Justice issues that CALPERS has very wrong.  

The 7 Failures of CalPERS ESG

1. Dripping in Oil: Financing Climate Damage
2. Healthcare Abuse: Profits Over Patients
3. Labor Abuse: Union Busting and Wage Pressure
4. Higher Education Pressure – Trump Loyalty Tests
5. Ignoring Epstein-Linked Governance Risks
6. Supporting Genocide in Gaza via Apollo
7. Supporting ICE as the largest holder of Palantir

My take is that only if a progressive makes it in the June 1st runoff can we reverse these CALPERS ESG trends.   A standard Democrat will keep this status quo, and any of the Republicans would make it worse. 

Their problematic relationship with Private Equity manager Apollo is at the center of these issues.   Apollo founder and CEO Leon Black was the main funder for Jeffrey Epstein from 2008-2019.   We will provide more details on the CALPERS/Apollo conflicts in the report when it comes out soon.   I use Apollo as the prime example of these violations, but it repeated dozens of times with

1. Dripping in Oil: Financing Climate Damage

CalPERS continues to invest billions with private equity firms identified as major fossil fuel backers.

The Private Equity Stakeholder Project has labeled multiple firms in CalPERS’ portfolio—including Apollo as well as other CALPERS major Private Equity managers including Blackstone, Carlye and KKR.   —as among the “Dirty Dozen” of private equity firms heavily exposed to oil and gas. https://pestakeholder.org/reports/private-equitys-dirty-dozen-12-firms-dripping-in-oil-and-the-wealthy-executives-who-run-them/

Private equity allows CalPERS to:

• Maintain fossil fuel exposure
• Avoid transparency
• Circumvent ESG scrutiny

There are EPA violations as well for Apollo portfolio companies.  Alcoa $8mm for air pollution violation, Nexeo Solutions, Univar Solutions, U.S. Silica for other EPA violations https://violationtracker.goodjobsfirst.org/

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2. Healthcare Abuse: Profits Over Patients

Private equity ownership of healthcare systems has become one of the most alarming ESG failures.

Apollo Global Management alone controls or operates hundreds of hospital facilities through Lifepoint Health and ScionHealth.  By far the largest private equity owner and operator of hospitals in the country Apollo has at least 235 locations

The Private Equity Stakeholder Project Hospital Tracker documents:

• Reduced staffing
• Higher costs
• Worse patient outcomes

CalPERS retirees are not just investors in this system. https://pestakeholder.org/pesp-private-equity-hospital-tracker/

They are its victims

CALPERS retirees were affected by Apollo’s harm done to health care in California not only by Private Equity ownership, but with their Private Credit interest in Steward Health care leading to its collapse.[1]

Many fines for Healthcare abuse among Apollo portfolio companies  $125 million by DOJ for Kindred Health, $104 million,  $12mm Gentiva Health, $12mm Odyssey Health Care, Vaughn Regional Medical, Iowa Hospice, Livingston Regional Hospitals, Palestine Healthcare Center. https://violationtracker.goodjobsfirst.org/

3. Labor Abuse: Union Busting and Wage Pressure

CalPERS claims to support labor rights—but only in public markets through proxy voting.

In private equity, the reality is different.

Apollo portfolio companies have been linked to:

• Labor violations
• Wage and hour disputes  at  Qudoba, Michaels Stores, Liberty Life, Tenneco, Federal-Mogal, Chuck e. Cheese
• Union conflicts

The AFL-CIO formally raised concerns in March 2026, citing both labor violations and governance failures tied to Apollo investments. https://aflcio.org/sites/default/files/2026-03/Letter%20to%20Apollo%20Global%20Management’s%20Lead%20Independent%20Director%20Gary%20Cohn%203.11.2026.pdf

 AFL-CIO is an umbrella organization for several unions affiliated with CALPERS including SEIU, AFSCME, AFT, IAFF, and IUPA.    Apollo recent labor violations include Makers Pride, Heritage Grocers, 5 Times Square.     

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4. Higher Education Pressure and Political Influence

The ESG contradictions extend into higher education.   The American Association of University Professors in their February 2026 letter to the SEC voiced their concern https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf

Apollo CEO Marc Rowan has been linked to:

• Funding initiatives tied to political loyalty tests
• Efforts to influence academic institutions
• Connections to federal political structures

These actions raise serious ESG concerns around:

• Academic freedom
• Governance independence
• Political interference

Apollo has a record of educational fraud.  It was fined $191mm for Apollo Education Group by Federal Trade Commission, and $67mm by DOJ for University of Phoenix.

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5. Ignoring Epstein-Linked Governance Risks

The most serious governance failure may be the one CalPERS refuses to confront.

Apollo’s founder Leon Black paid Jeffrey Epstein hundreds of millions of dollars between 2008–2019.

Subsequent disclosures have raised questions about:

• The extent of Apollo’s internal knowledge
• The accuracy of prior disclosures
• Ongoing governance risks

In 2026, the American Federation of Teachers and the American Association of University Professors filed a complaint with the SEC alleging Apollo disclosures around Jeffrey Epstein may have been materially misleading https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf

AFL-CIO wrote a complaint in March 2026 echoing the AFT Epstein concerns.

Several firms have filed stock drop cases against Apollo citing ties to Epstein, and while CALPERS regularly joins these types of suits so far they have not.

CalPERS, despite being a major investor, has largely remained silent.

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6. Gaza, Human Rights, and Political Alignment

Apollo leadership has also been drawn into geopolitical controversy, including:

• Support for politically sensitive initiatives related to Gaza.  Apollo CEO Marc Rowan has been named by President Trump to his Gaza Board of Peace in January 2026.
• In 2018 Rowan immediately after meeting Jared Kushner in the Trump White House Apollo offered his family company a $180 million loan. https://prospect.org/2023/10/21/2023-10-21-moral-authority-of-marc-rowan/

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7. Supporting ICE Through Palantir Holdings

CalPERS holds approximately $734 million in Palantir Technologies.[3]

Palantir’s software has been used by U.S. Immigration and Customs Enforcement (ICE) for:

• Deportation tracking
• Surveillance operations
• Data integration across enforcement systems

This has triggered protests from progressive groups, who argue:

Public pension funds are financing the infrastructure of deportation.  https://readsludge.com/2026/03/31/these-state-pension-funds-invest-in-palantir/

CalPERS has over 40 pages of ESG policies and has signed onto:

• UN Principles for Responsible Investment
• UN Global Compact
• Global Sullivan Principles

Yet its largest capital allocations contradict those principles.

Apollo has a long record of breaking the law with 792 fines reported  by its portfolio companies https://violationtracker.goodjobsfirst.org/

Apollo has many companies that many have privacy concerns with.

Parents of school children nationwide went ballistic in February 2026 when it was revealed the connection between leading school picture provider Lifetouch and Leon Black who was accused of raping a 7 year old girl.  Lifetouch parent Shutterfly who is owned by Apollo paid a $6.75mm settlement for sharing facial scans in 2021. https://www.law360.com/articles/1421673/shutterfly-pays-6-75m-to-end-facial-scan-privacy-claims  

$117 million for Privacy violations from Yahoo.  $16mm for Privacy violations from ADT,  $6.7mm for Privacy violation for Shutterfly, INC

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What we have now is “Greenwashing through private markets.”  Wall Street remains the priority partner. ESG operates as a branding layer

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Only a progressive Governor can clean up CALPERS and bring it back to the ESG values that it claims.

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