From the NBC Story https://www.nbcnews.com/news/us-news/nations-largest-public-pension-fund-plagued-secrecy-underperformance-p-rcna346330

• The fund’s staffers receive “excessive compensation” despite its dismal performance. Four executives make more than $1 million a year, another four more than $900,000 and 26 earn between $500,000 and $900,000.

From the new groundbreaking CalPERS report and NBC report    .     CALPERS CEO Marcie Frost made $1.4mm despite not having a college degree and is one of 8 making over $900,000 a year.  There are 34 making over $500,000 a year and 86 making over $300,000 a year.  This is not only an insult to taxpayers and government employees but is so excessive it might endanger the tax status of the plan.  These salaries are so excessive that even a mid-level investment employee, the Managing Investment Director of ESG, was singled out in a recentoversight letter from the U.S. House Committee on Education and the Workforce to officials at CalPERS for making $624,024 as one of the factors in challenging the tax status of the plan.  https://edworkforce.house.gov/uploadedfiles/02.12.26_calpers_loss_oversight_letter_will_instructions.pdf

Excessive Staff Compensation Driven by Bogus Benchmarks

CalPERS appears to have some of the highest public pension investment staff salaries in the nation, as well as the highest investment performance bonuses. Given that investment performance is dismal, the lavish bonuses awarded to pension staff seem especially unwarranted. Bogus benchmarks drive this excessive compensation.  See report https://www.nakedcapitalism.com/2021/08/calpers-comes-dead-last-of-34-public-pension-returns-despite-having-biggest-best-paid-investment-office.html

Compensation levels at CalPERS now extend far beyond the norms of public administration. The Governor of California earns approximately $234,000 annually, yet dozens of CalPERS employees earn multiples of that amount. CEO compensation increased from roughly $406,000 in 2018 to more than $1.24 million in 2024, an increase of more than 200 percent—far outpacing the wage growth of the public workers whose retirement security the fund exists to protect.

These excessive compensation levels are justified through a performance measurement system that is largely internally constructed and consultant-validated rather than independently verified against investable alternatives.  In 2022, Naked Capitalism wrote, “… Global Governance Advisors is enabling the giant pension fund’s staff in misappropriating from beneficiaries via the device of fundamentally and pervasively flawed pay benchmarking. https://www.nakedcapitalism.com/2022/04/calpers-consultant-global-governance-advisors-recommends-further-overpaying-grossly-underperforming-calpers-staff.html

Executive incentives rely heavily on CalPERS’ custom policy benchmarks and discretionary organizational metrics rather than direct comparison to transparent market benchmarks. As a result, compensation can rise even during periods marked by leadership instability, governance controversy, and poor investment performance.

Governance concerns are further illustrated by a series of leadership controversies and oversight failures. These include unresolved questions regarding executive credentials, resume exaggeration by senior officers, legal conflicts in hiring processes, and repeated turnover in the Chief Investment Officer role.   Horrible turnover with Sr. Execs still existed despite the excessive pay and is well documented in Naked Capitalism.  https://www.nakedcapitalism.com/2021/01/calpers-making-it-impossible-to-hire-competent-chief-investment-officer.html   https://www.nakedcapitalism.com/2020/08/calpers-chief-investment-officer-ben-meng-made-false-felonious-financial-disclosure-report-more-proof-of-lack-of-compliance-under-marcie-frost.html    

https://www.nakedcapitalism.com/2021/08/exposed-how-calpers-tried-and-continues-to-try-to-cover-up-former-chief-investment-officer-ben-mengs-misconduct.html

https://www.nakedcapitalism.com/2021/03/former-board-member-jj-jelincic-sues-calpers-over-illegal-secret-board-discussion-after-cio-ben-mengs-abrupt-departure-and-hiding-of-records-related-to-583-million-overstatement-of-real-estate-asse.html

^[1] https://www.nakedcapitalism.com/2023/09/calpers-chief-investment-officer-nicole-musicco-resigns-abruptly-intensifying-calpers-senior-staffing-instability.html     https://www.nakedcapitalism.com/2018/08/los-angeles-times-slams-calpers-vetting-failures-resulting-exodus-cfo-asubonten-resume-misrepresentations-doubts-whether-ceo-marcie-frost-made-needed-changes.html

Compensation advisor GCA benchmarks CalPERS executives against private-sector investment professionals, despite fundamental differences in risk exposure, compensation volatility, and personal capital at risk inflating compensation bands while requiring no performance accountability.  

In short, CalPERS pays higher than private sector salaries for investment performance that would result in termination in the private sector. An independent Inspector General would fundamentally alter the structure in which salaries are justified, evaluate the relationship between compensation escalation and measurable long-term net performance, as well as recommend claw back or deferral structures tied to realized economic outcomes rather than interim marks.

Our new 255 page Forensic investigation CalPERS: America’s Misled and Misleading Pension Leader  captures the twisted relationship CALPERS has with Private Equity whose 4 leading players are Apollo, KKR, Blackstone & Carlyle where CALPERS invests billions.   Private Equity extracts from CA Taxpayers over $5 billion a year in fees from secret no-bid contracts with CALPERS.   https://www.rpea.com/view/download.php/news/calpers-investigation-report

In an 2025 interview with CNBC’s “Squawk on the Street”,  CalPERS CEO Marcie Frost after smirking, gratuitously reassured her Private Equity Partners:

“Private markets are called private for a reason… CalPERS is not sharing the limited partnership agreements. CalPERS is not sharing any side letters… We are extremely transparent… But frankly, private markets are private for a reason…”   https://www.cnbc.com/video/2025/08/07/calpers-ceo-on-expansion-into-private-markets.html

Frost refused to provide any unredacted Private Equity contract of over 400 from open records request for the Forensic Investigation in timely matter.

Frost is paid $1.4 million per year and like Jeffrey Epstein does not have a college degree.

Our report mostly covers the overall twisted relationship with Private Equity but I wanted to focus on the most sick relationship of all, Apollo.  The report does break 3 major Apollo related stories.

1. CALPERS primary consultant of 30 years Wilshire was secretly bought by Apollo in 2021. This was covered in NBC story https://www.nbcnews.com/news/us-news/nations-largest-public-pension-fund-plagued-secrecy-underperformance-p-rcna346330

2. Apollo admits that 75-80% of its assets are from public pensions.  CalPERS as major US pension leader has contributed $billions to Apollos profits.

3. Apollo total commissions to xCalpers Trustee Villabous – who committed suicide – were significantly higher $35mm vs. $22 mm in placement agent fees which was number most widely circulated.  The SEC number did not include the $13.2 mm commission Villabous got from CALPERS purchasing an equity stake in Apollo stock. It cites and references the AFT and AFLCIO letters tying Apollo to Jeffrey Epstein.  And the following table.

Apollo–CalPERS Investment Timeline

Name of Fund / Transaction	1st Year	CalPERS Commitment ($)	Commission Paid ($)
Apollo Investment Fund IV, L.P.	1998	150,000,000	—
Apollo Investment Fund V, L.P.	2001	250,000,000	—
Apollo Management VI, L.P.	2005	650,000,000	3,864,734
Apollo Investment Fund VI, L.P.	2006	520,000,000	—
Apollo Alternative Assets, L.P.	2006	200,000,000	4,400,000
Apollo Management VII, L.P.	2007	—	3,500,000
Apollo Equity Stake (Pre-IPO Private Exchange)	2007	601,000,000	13,200,000
Apollo European Principal Finance Fund, L.P.	2008	82,991,535	—
Apollo European Funds (multiple)	2008	—	1,000,000
Apollo Credit Opportunity Fund	2008	1,000,000,000	9,070,833
Apollo Investment Fund VIII, L.P.	2013	350,000,000	—
Apollo Investment Fund VIII (Credit Allocation)	2013	800,000,000	—
Apollo Investment Fund IX, L.P.	2019	550,000,000	—
Apollo Investment Fund X, L.P.	2023	225,000,000	—
Apollo S3 Equity & Hybrid Solutions Fund, L.P.	2025	175,000,000	—
TOTAL (Documented)		6,553,991,535	35,035,560

Source of commissions Attorney General Complaint of May 2010 https://oag.ca.gov/news/press-releases/brown-files-suit-against-former-calpers-officials-and-freezes-assets-alfred?   Source of commitments CALPERS June 25 Private Equity Report

CALPERS corruption was so broad that despite the Forensic Investigation being 255 pages only a few pages were dedicated to Apollo.  So, I have put together a piece on a timeline that explores more issues in depth.

For years before the current Private Debt meltdown and the Jeffrey Epstein scandal CALPERS has been in a conflicted relationship with Apollo.   Since 2000 it is estimated that CALPERS has paid $10 to $14 billion in fees to Apollo in secret no-bid contracts. In 2007 it actually purchased an ownership interest in Apollo.  CALPERS supposed independent investment consultant Wilshire is secretly owned by Apollo.  These conflicts continued for decades and are still going on.  A former Trustee collected $35 million in secret commissions from Apollo but died from “suicide” before he could be put in prison.  However, the CALPERS Executive Director did go to prison for 5 years on Apollo related transactions.     This period in time overlaps the time (2005-2019) when Leon Black of Apollo was the largest funder of Jeffrey Epstein admitting to paying over $170 million to him for “tax” advice.

CalPERS in 1998 put $150 million in the Apollo Investment Fund IV, and in 2001 $250 million Apollo Investment Fund V.   But in 2007 it went to a new level.

Alfred Villalobos served as and was on the CalPERS’ Board from 1992 to 1995.  After leaving the CALPERS board he eventually in the early 2000s created his placement agent firms ARVCO and CF partners which received over 95% of its revenue strictly from Apollo.  Charles “Chuck” Valdes served on the CalPERS board for 25 years and was Chair of the Investment Committee from 1988 to 1999 and again from 2005 to 2007.  Federico Buenrostro was a Senior California state official before joining CALPERS as CEO in 2002.

Villalobos, via his placement agency ARVCO contracted with Apollo Management VI, L.P. on or about May 25, 2005, for a $650 million investment. Villalobos received $3,864,734 in commissions secretly from Apollo for this placement.   

Villalobos successfully induced CalPERS to invest $200 million in Apollo Alternative Assets, L.P.  on or about July 27, 2006, and received a $4.4 million commission from Apollo. 

Villalobos, Valdes, and Buenrostro made a ten-day trip together in November of 2006, ostensibly to attend the two-day Capital Markets Conference in Dubai. They flew together from San Francisco to London on November 17,2006 and then from London to Dubai the next day. Then on to Hong Kong, where they were picked up by a limousine. They then took a 30-minute helicopter ride from Hong Kong to Macau, a famous gambling location. https://oag.ca.gov/news/press-releases/brown-files-suit-against-former-calpers-officials-and-freezes-assets-alfred?

In May of 2007 a senior CalPERS investment officer Leon Shahinian responsible for evaluating a multibillion-dollar Apollo Private Equity commitment was invited to a due diligence meeting with Leon Black at Apollo’s offices in New York prior to attending a black-tie event at the Museum of Modern Art (“MOMA”) honoring Apollo founder Leon Black.  Shahinian made no effort to book a commercial flight to New York, choosing instead to accept former trustee now placement agent Alfred Villalobos’ offer to fly with him there by private jet.

Villalobos and ARVCO, his placement agent firm apparently paid for all the travel arrangements for the trip, and later billed Apollo over $8,000 for the suite and related hotel charges, over $1,500 in car service fees, and over $50,000 for the use of the private jet. Villalobos was later reimbursed for these costs by Apollo, including the jet. 

One month after his trip to New York, Shahinian made a presentation to the Investment Committee of the Board chaired by Valdes regarding the proposed investment in Apollo Management VII, L.P and it was approved in July 2007.   Villalobos received a secret $3.5 million commission from Apollo for this transaction.

In September 2007, CalPERS purchased a $601 million ownership stake (8.6%) in Apollo ahead of Apollo’s listing on Goldman Sachs’ private exchange. After the buy in, the relationship went to a higher level. Villalobos received a secret $13.2 million commission from Apollo for this transaction.

In early 2008 Villalobos placed several Apollo European funds and received $1 million in commissions.  CalPERS invested $1 billion in Apollo Credit Opportunity on or about April 15, 2008, and as compensation, Villalobos received $9,070,833 in commissions from Apollo.

For nearly 2 years this scheme operated in silence until the SEC sent a formal inquiry to Villalobas firm ARVCO on July 17, 2009, and some stories around placement agents dribbled out in late 2009 by the Sacramento Bee.   The scheme was not caught by any CALPERS internal controls, and many believe it was Buenrostro’s x-wife who was listed as providing testimony to the U.S. DOJ.  

Quietly A CALPERS special review of this scandal was started in 2009 by law firm Steptoe & Johnson which Naked Capitalism called a Whitewash.  https://www.nakedcapitalism.com/2019/08/calpers-in-bed-with-jeffrey-epstein-client-and-co-investor-apollos-leon-black-even-after-apollo-pay-to-play-scandal-led-to-conviction-and-jail-term-for-former-calpers-ceo.html

The Steptoe report focused on Villalobos and Buenrostro who were guilty but covered up many others who should have received more scrutiny especially Epstein linked Apollo.  Philip S. Khinda (lead author of the review report) simultaneously negotiated and then memorialized  in a “new strategic relationship agreement”  with Apollo Global Management in a April 16, 2010 letter addressed to Leon D. Black, explicitly praising Apollo’s cooperation with the still-ongoing review. https://documents.latimes.com/calpers-special-review/?_gl=1*1pjpo7m*_gcl_au*NTcwOTU0NTEyLjE3NjkzNjUyNDk

So while Apollo paid the placement agent fees (kickbacks) over $35 million to Villalobos and made the $billions in excessive fees they escaped any accountability for this scandal.  Coincidentally, Steptoe & Johnson were Epstein’s criminal attorneys when he died in prison in 2019.  

The media attention did not break big until 2010 with articles in the Wall Street Journal and New York Times.  The California Attorney General filed Civil Actions, and the FBI and other agencies opened criminal probes May-June 2010.

In April 2012, the SEC charged former CalPERS CEO Federico Buenrostro and his close associate/placement agent and former trustee Alfred Villalobos with falsifying investor disclosure letters to induce Apollo to pay placement-agent fees the SEC said Apollo supposedly would not otherwise have paid without those disclosure letters.  In August 2014, the U.S. Attorney’s Office (NDCA) described a superseding indictment alleging Villalobos conspired with Buenrostro in connection with a $3 billion CalPERS investment into Apollo-managed funds, that Villalobos acted as Apollo’s placement agent through ARVCO, and that fraudulent investor disclosure letters were created after CalPERS offices declined to sign.

In January 2015, Villalobos died in what authorities described as an apparent suicide, just before trial in the CalPERS corruption case. Buenrostro was sentenced to 5 years in prison. Reporting at the time underscored that Apollo itself was not accused of wrongdoing in that episode (above the law)— that even though they benefited the most from the corruption they appeared to be immune from any accountability.   

Apollo was rewarded with continuing exposure and significant growth. CalPERS’ Private Equity Program performance table lists Apollo Investment Fund VIII (2013)with a $350 million commitment.  This is in addition to an additional $800 million commitment to Private Credit.

CALPERS is regularly referred to as “America’s top Pension fund” and is seen by other pensions as a first mover and policy setter. Apollo co-founder Joshua Harris admitted at a 2013 meeting of the Philadelphia Board of Pensions that the firm’s capital base was overwhelmingly dependent on public retirement systems. Asked directly whether Apollo had many public pension investors, Harris responded bluntly that “almost all” of Apollo’s capital came from public funds, estimating that roughly 75% to 80% of Apollo’s capital was supplied by public pension plans.   Many other state pension plans invested $billions with Apollo based on CALPERS lead. https://www.phila.gov/pensions/PDF/IM_03_28_13_Investment_Minutes.pdf

While CALPERS has refused to disclose any of these Apollo contracts unredacted in our open records request, Pennsylvania accidently released their Apollo Investment Fund VIIIcontract, (which is the same one CalPERS has) and it is publicly available on the Naked Capitalism web site.  https://trove.nakedcapitalism.com/LPAs/verified-as-LPAs/Apollo_Investment_Fund_VIII_LPA_S1.pdf    Apollo agreements make use of offshore vehicles, parallel structures, and non-California governing law. The contracts embed the possibility of NAV smoothing, delayed recognition of impairment, and performance presentation that cannot be independently reconstructed. Each agreement centralizes valuation authority in the General Partner. Independent valuation is not mandated as binding. Audit rights are limited. Third-party valuation is discretionary. Apollo explicitly permitted affiliates to engage in other investment activities, to manage competing funds, to allocate opportunities among affiliated vehicles, and to pursue co-investment structures.  In 2016 Apollo Private Equity was fined $52 million by the SEC for Investor Protection violations misleading fund investors about fees and excessive expenses and I could find no record of CALPERS addressing this.

In 2018 CEO Rowan immediately after meeting Jared Kushner in the Trump White House, Apollo offered his family real estate company a $180 million loan. https://prospect.org/2023/10/21/2023-10-21-moral-authority-of-marc-rowan/

In 2019 when Jeffrey Epstein was charged with sex trafficking, it was revealed that Apollo founder and CEO Leon Black had paid Epstein over $170 million for supposed tax advice from a college dropout.  CALPERS Trustees were told (implicitly and explicitly) that governance risk was contained, that Apollo’s internal review had addressed the matter and they took no action. We now know that those narratives were materially deficient. https://www.nakedcapitalism.com/2019/08/calpers-in-bed-with-jeffrey-epstein-client-and-co-investor-apollos-leon-black-even-after-apollo-pay-to-play-scandal-led-to-conviction-and-jail-term-for-former-calpers-ceo.html

On Jan. 25, 2021, Apollo filed a SEC Form 8-K that included two exhibits: a letter from then-CEO Leon Black to Apollo’s limited partners, and an investigative report from the law firm of Dechert LLP. The Dechert report takes pains to minimize Epstein’s ties with other Apollo executives, including CEO Marc Rowan.  https://www.sec.gov/Archives/edgar/data/1411494/000119312521016405/d118102d8k.htm

In 2021, Wilshire was acquired by private equity firms CC Capital Partner and Motive Partners. That same year, Apollo Global Management, Inc., acquired up to a 24.9 percent minority stake in Motive’s management company and Apollo and its affiliates became limited partners in Motive managed vehicles.  To our knowledge this was not disclosed to board.  Having you so-called independent consultant Wilshire owned by a manager Apollo that they are supposed to evaluate is an egregious conflict of interest.

The investments continued with the Apollo Investment Fund X (2023) with a $225 million commitment. There was Continued Epstein scandal around Leon Black into 2023. https://www.nakedcapitalism.com/2023/07/former-apollo-chief-leon-black-has-more-jeffrey-epstein-splaining-to-do-with-tax-evasion-alleged-rape-of-autistic-16-year-old.html  Conflicts continue as Dana Hollinger, a CALPERS board member from 2014-2019 joined the board of Apollo Private Markets in 2025.  https://www.linkedin.com/in/dana-hollinger-j-d-6a122611/

Performance losses based on Apollo’s own self-reported numbers are around $3 billion.  Actual losses may be another $1billion or more if Apollo Private Credit and Private Equity were marked to market.  

 On February 1^st 2026 the Financial Times of London story dropped a story based on a recent release of the Epstein files, https://www.ft.com/content/092d9e44-ec17-4da7-8b58-e43bf09113ab

that Apollo itself and CEO Marc Rowan had much deeper ties to Jeffery Epstein than previously disclosed in the 2001 SEC filing and that Apollo chief Marc Rowan consulted Epstein on firm’s tax affairs.

The February 2026 complaint filed with the U.S. Securities and Exchange Commission by the American Federation of Teachers and American Association of University Professors who both represent CALPERS members alleges that Apollo’s disclosures may have been materially incomplete or misleading. 

https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf

The complaint goes into detail the contradiction of the 2021 SEC disclosures and the recently disclosed Epstein Files uncovered by the FT.  

 The unions asked the Commission to investigate whether Apollo’s prior disclosures about it and its executives’ ties to Jeffrey Epstein painted an “inaccurate and incomplete picture.” Their letter pointed to newly released Epstein documents referring to Marc Rowan, including meetings at Apollo’s offices, breakfasts involving Rowan, Leon Black, and Epstein, discussions of donor-advised funds, tax matters, a possible Apollo inversion, and other business-related contacts. The letter concluded that the 2021 disclosures may have offered “an inaccurate depiction of the extent of Apollo’s ties with Jeffrey Epstein” and said the SEC should investigate whether the statements were materially false or misleading.

Also, in early March 2026 securities lawyers filed stock-drop cases against Apollo claiming that they lied on disclosures about Epstein involvement causing the stock to drop around 35%. https://www.investmentnews.com/regulation-legal-compliance/legal-class-action-accuses-apollo-of-hiding-epstein-ties-in-sec-filings/265521

As almost every pension including CALPERS owns Apollo stock, it puts CALPERS in a strange position whether to join these class action cases.

In March 26 the AFL-CIO filed another complaint echoing the Epstein concerns of the AFT letter and adding some labor violations of Apollo portfolio companies. 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.      

More and more disturbing ties between Leon Black and Jeffrey Epstein continue to build as reported in March 2026 by the NY Times. https://www.virginislandsdailynews.com/ap/how-epstein-helped-solve-billionaire-leon-black-s-problems/article_1d867799-cac3-4a44-87b9-6adb001e2e4c.html

Apollos stock price drop has attracted lawsuits, which the Mississippi Public Plan has joined but CALPERS has shown no interest. https://commonsense401kproject.com/2026/04/11/state-pensions-notably-absent-from-apollo-stock-drop-cases/    CALPERS has twisted and violated its own ESG policies to accommodate Apollo. https://commonsense401kproject.com/2026/04/26/calpers-esg-failure/

Famous Oxford Professor Ludovic Phalippou publicly supports CA-SB 1319 Private Equity Sunshine Act for California Public Pensions, a modest transparency bill. https://www.linkedin.com/feed/update/urn:li:activity:7455913436183629824/

However, CalPERS has spent $millions in staff hours trying to block even this small amount of transparency.   https://www.calpers.ca.gov/documents/202605-full-agenda-item08a-02-a/download?inline    With the support of Private Equity industry CalPERS at this time seems to have killed this Private Equity transparency bill, denying it a hearing.

The conflicted CALPERS – Apollo relationship has cost participants and taxpayers $billions. Excessive fees as high as $14 billion. Additional performance drag of many more $billions.

With Apollos culture being exposed by the Epstein connections, it is way past time for CALPERS to part ways with this parasitic vendor.

The collapse of PHL Variable Insurance Company should end the myth that annuities are somehow “safe” simply because they are wrapped in insurance company marketing language. What happened at PHL is not just an isolated insurance failure. It is a warning sign for the entire retirement system—especially for ERISA plans using annuities inside 401(k)s and Pension Risk Transfer (“PRT”) deals. Any ERISA plan with an Annuity without a downgrade clause is at high risk.

According to recent reporting with NBC https://www.nbcnews.com/news/us-news/paid-insurance-company-99000-generate-retirement-income-life-collapsed-rcna331934

PHL Variable—a private equity-owned insurer—collapsed after years of deterioration and is now heading toward liquidation, leaving many policyholders facing potentially massive losses above state guaranty limits.

The mainstream retirement industry keeps pretending annuities are equivalent to government-backed guarantees. They are not. They are unsecured obligations of highly leveraged insurance companies increasingly tied to private equity and private credit risk.

That distinction matters enormously under ERISA.

The PHL collapse exposes the fundamental fraud embedded in the modern annuity sales pitch to retirement plans. Participants are told they are buying “guaranteed income.” In reality, they are often buying concentrated exposure to a single insurer’s opaque balance sheet, private credit portfolio, derivatives exposure, and liquidity management strategy.

This is precisely why annuities in ERISA plans increasingly look like prohibited transactions.

The Department of Labor’s recent pro-annuity guidance ignores the central issue: the retirement system is being pushed toward products where the real risks are hidden inside insurance-company accounting structures that participants cannot evaluate. The underlying investments are often illiquid, privately valued, and shielded from normal SEC-style transparency. As discussed previously on Commonsense 401(k), many of these risks are amplified through state-regulated Collective Investment Trusts (“CITs”) and insurance separate accounts that avoid meaningful public disclosure.

PHL demonstrates what happens when the illusion breaks.

State guaranty associations that the annuity industry point to are a farce

https://commonsense401kproject.com/2025/06/24/state-guarantee-associations-behind-annuities-are-a-joke/ a typically capped around $250,000 for annuity present values have $0 balances so only designed for minimal at best coverage.

This becomes especially dangerous in Pension Risk Transfers which have 100% annuity coverage.

In a traditional defined benefit plan, retirees have protections through ERISA fiduciary duties and the Pension Benefit Guaranty Corporation. But once liabilities are dumped into an annuity structure through a PRT transaction, participants become exposed primarily to insurer solvency risk and limited guaranty association protections.

That is a massive downgrade in protection that the industry rarely discusses honestly.

The irony is staggering. Pension sponsors claim they are “de-risking” by shifting obligations to insurers. In reality, they may simply be replacing diversified pension funding structures with concentrated exposure to private equity-driven insurers increasingly loaded with private credit, commercial real estate, leveraged loans, and exotic structured assets.

The PHL collapse also destroys one of the central talking points used by annuity advocates: that insurance company failures are extremely rare and therefore not economically meaningful.

The modern insurance industry is not the same industry it was twenty years ago.

Private equity firms have aggressively moved into life insurance and annuity markets because retirement assets represent one of the largest pools of permanent capital in the world. Firms like Apollo Global Management transformed insurers such as Athene Holding into engines for gathering annuity assets and investing them into higher-risk private credit strategies. The economic model depends heavily on earning hidden spreads between what insurers make on investments and what they credit to retirees.

That creates an unavoidable conflict of interest.

The more risk the insurer takes internally, the larger the potential spread profits for shareholders and private equity sponsors. But retirees bear the ultimate solvency risk.

This is exactly why the PHL story should terrify fiduciaries considering annuity-heavy target-date funds or PRT transactions.

ERISA fiduciaries are supposed to act solely in participants’ interests. Yet many annuity arrangements involve opaque compensation, undisclosed spread profits, affiliated recordkeepers, proprietary CITs, and insurer-controlled valuation systems. Participants cannot independently evaluate the underlying risks because the accounting itself is often non-transparent.

The retirement industry calls this “innovation.”

A more accurate term may be “regulatory arbitrage.”

Even worse, the accounting structure of many insurance products can hide deteriorating asset values for years. As discussed previously in DOL 401(k) Fiduciary Rule Enables Accounting Fraud, private credit and insurance assets are often not marked to market in ways participants would recognize from mutual funds or public securities. This allows risk to accumulate quietly until a solvency event occurs.

That appears increasingly relevant in the PHL collapse.

The industry still insists annuities belong inside 401(k) default investments despite the fact that participants cannot meaningfully evaluate insurer balance sheets, CDS spreads, private credit concentrations, liquidity stress, or reinsurance chains.

Would any prudent fiduciary knowingly concentrate retirees into a single opaque private-credit vehicle with limited transparency, weak liquidity, and capped guaranty protection?

That is effectively what many annuity structures have become. Fixed annuities are in 2000 of the largest 8000 plans over $100 million in size and in bigger numbers in small plans. The new trend is to hide annuities into poorly state regulated CITs.

The PHL collapse should force courts, regulators, and fiduciaries to reconsider the entire legal framework surrounding annuities in ERISA plans. If these products expose participants to undisclosed insurer spread compensation, opaque accounting, affiliated-party conflicts, and substantial insolvency risk, then the prohibited transaction questions become unavoidable.

Even beyond the immediate losses, the PHL collapse exposes another major fiduciary failure in annuity structures used inside ERISA plans and Pension Risk Transfers: the lack of meaningful liquidity and downgrade protections. Any annuity used in a 401(k), stable value fund, or PRT transaction should contain a clear downgrade-triggered exit clause allowing fiduciaries to reduce or terminate exposure if the insurer’s credit quality materially deteriorates. That is standard risk management in many bond and derivative markets, yet retirement annuities are often structured as one-way lockups where participants remain trapped as the insurer weakens. Without downgrade clauses tied to credit ratings, CDS spreads, reserve deterioration, or liquidity stress, retirees can be forced to ride an insurer all the way into collapse. Fiduciaries should not be required to wait until losses approach 100% before acting. The ability to exit a deteriorating insurer early—while there is still market value left—is essential prudence under ERISA, particularly now that many annuity providers are deeply tied to private equity-driven private credit strategies.

The industry keeps calling annuities “guaranteed.”

PHL reminds us that the guarantee is only as strong as the insurer standing behind it.

https://commonsense401kproject.com/2026/03/26/apollos-garbage-dump-athene-loading-up-on-risk-endangers-retirees-in-prts-and-other-annuity-investors/ https://commonsense401kproject.com/2026/04/03/dol-401k-fiduciary-rule-enables-accounting-fraud/ https://commonsense401kproject.com/2026/03/01/annuities-as-prohibited-transactions-in-retirement-plans/

The battle for Northern Kentucky is no longer just another Republican primary. It has become a referendum on whether a genuine grassroots constitutional conservative can survive against the combined pressure of billionaire money, national political machines, and what many activists increasingly call the “Epstein Class” — the network of elite power brokers, lobbyists, mega-donors, intelligence-connected operatives, and influence organizations that shaped both parties for decades.

Epstein Justice Kentucky Facebook Group

At the center of this political storm stands Thomas Massie — perhaps the single most independent Republican in Congress. Massie has repeatedly broken with party leadership, challenged endless wars, opposed surveillance expansions, criticized corporate welfare, and most importantly for many Kentuckians, became one of the loudest voices demanding full transparency on the Jeffrey Epstein files.

That stance changed everything.

Massie’s bipartisan push with Democrats to force release of Epstein-related records put him on a collision course not only with entrenched Washington power, but also with enormous political money. According to multiple national reports, this primary has become one of the most closely watched Republican races in America precisely because it tests whether independent-minded conservatives can survive after opposing the establishment consensus.

The race is now flooded with outside influence. a coordinated effort by billionaire-funded Super PACs, AIPAC-aligned interests, and national donor networks to destroy a congressman who refused to stay quiet on Epstein, Israel policy, surveillance, spending, and foreign wars.

Massie himself has framed the race as a fight against “Israel first billionaires” and national money trying to overpower local voters in Northern Kentucky. Whether voters agree with that framing or not, the financial imbalance is undeniable. Millions of dollars have poured into a congressional primary that ordinarily would attract little national attention.

For activists connected to the broader Epstein transparency movement, this election carries symbolic importance far beyond Kentucky’s 4th District. They see Massie as proof that one of the few remaining independent members of Congress can still challenge powerful interests publicly — and survive.

That is why this election feels existential to many grassroots voters.

The establishment message is simple:
Fall in line.
Stop asking questions.
Accept the approved narrative.

But the grassroots message is different:
Who really controlled Epstein?
Who benefited?
Why are so many records still hidden?
And why are politicians who demand answers suddenly targeted with overwhelming financial opposition?

Northern Kentucky voters now stand at the center of that conflict.

Massie’s supporters argue that if someone with his name recognition, fundraising base, and deep local roots can be defeated by outside money and national pressure campaigns, then independent representation in Congress may effectively be over. They see this race as one of the clearest modern examples of grassroots politics versus institutional power.

For Kentucky activists involved with Epstein transparency efforts, the stakes feel even larger than party politics. They believe the public is only beginning to understand how deeply interconnected intelligence operations, billionaire finance, lobbying networks, media influence, and political protection systems may have been within the Epstein orbit.

And in their eyes, Thomas Massie crossed an unforgivable line:
He kept asking questions.

This week’s election will reveal whether Northern Kentucky still values independent representation — or whether modern congressional politics has become too dominated by national money and coordinated influence campaigns for true grassroots candidates to survive.

The author is the director of Kentucky Epstein Justice https://www.facebook.com/groups/765420896401514 previous story is at https://commonsense401kproject.com/2026/04/05/kentucky-epstein-justice/

A new March 2026 academic study, Choosing Pension Fund Investment Consultants, may be one of the most important confirmations yet of what many critics of public pension investing have argued for years: investment consultants are not independent guardians of pension performance. They have increasingly become a distribution network for higher-fee alternative investments — especially private equity, private credit, hedge funds, and real assets — with little evidence that these strategies improve returns for pension beneficiaries.

The study by Aleksandar Andonov, Matteo Bonetti, and Irina Stefanescu systematically examines how consultants shape the investment behavior of U.S. public pensions.  https://ssrn.com/abstract=4306217 Their findings strongly reinforce the concerns raised earlier in the Commonsense article, How America’s Largest Pension Consultants Became the Distribution Arm for Private Equity.

The core conclusion is devastating.

Consultants push pensions toward the same high-fee investments, often through the same networks of private fund managers, creating widespread portfolio convergence and systemic concentration risk — yet the study finds no meaningful evidence that these consultant-driven shifts improve performance.

The Consulting Industry Now Controls Public Pension Asset Allocation

According to the study, investment consultants advised approximately $19.5 trillion in pension assets as of 2024.

Over time, the consulting industry itself has become highly concentrated. By 2020, the top three consultants advised roughly half of all U.S. public pension assets.

That means a handful of firms increasingly determine:

• which asset classes pensions enter,
• which private equity firms receive commitments,
• which benchmarks are used,
• which “risk models” are accepted,
• and ultimately how trillions in retirement assets are deployed.

The study found that when pensions hire a new consultant, they rapidly begin to resemble the portfolios of the consultant’s other clients.

This is not independent fiduciary analysis.

It is industrialized standardization.

A pension fund in California, Iowa, Kentucky, or Texas increasingly receives variations of the same portfolio model:

• higher allocations to private equity,
• higher allocations to private credit,
• more “real assets,”
• lower transparency,
• more illiquid structures,
• and higher fees.

The authors specifically found that:

“Pension funds adjust their asset allocations toward the average portfolios of the consultant’s existing clients.”

That sounds less like fiduciary customization and more like franchise distribution.

The Private Equity Push

The study directly confirms that consultants have been central to the explosion of alternative investments in public pensions.

Public pension allocations to alternatives rose from roughly 10% to 30% during the study period.

At the same time, use of specialized private equity consultants surged.

Why?

The paper gives the answer plainly:
pensions hire specialized consultants specifically to scale up alternative investments.

Not because performance was proven superior.

Not because risk was lower.

Not because transparency improved.

But because pensions had target allocations to alternatives they wanted to fill.

The consultants became the machinery that helped force capital into private markets.

This mirrors precisely what critics have argued for years: consultants are compensated and incentivized inside an ecosystem dominated by private equity firms, private credit managers, real asset sponsors, and opaque benchmarking structures.

The “Access” Myth Falls Apart

One of the biggest defenses of private equity consultants has always been:
“We provide access to elite managers.”

The study directly tested this claim.

The researchers examined whether consultant-connected pensions gained access to:

• oversubscribed funds,
• later-stage top managers,
• co-investment opportunities,
• or otherwise capacity-constrained vehicles.

The answer:
almost no evidence.

Instead, consultants primarily steered pension money toward managers already within the consultant’s network.

The study found:

“A private fund is two to four times more likely to receive a commitment if it is connected to the consultant.”

That finding should alarm every public pension beneficiary in America.

Because it suggests the consultant business model is driven less by objective fiduciary analysis and more by network distribution dynamics.

In plain English:
the same consultants repeatedly funnel pension assets to the same private equity firms.

No Performance Benefit

The most important finding may be the simplest.

After all the complexity, opacity, illiquidity, and fees:
there was no measurable performance benefit.

The study found:

• no significant improvement in pension performance after consultant-driven allocation changes,
• no meaningful outperformance from specialized consultants selecting private funds,
• and no reliable evidence that consultant-advised private equity investments performed better than non-advised investments.

This is an extraordinary result considering the billions paid annually in:

• consulting fees,
• private equity management fees,
• carried interest,
• transaction fees,
• monitoring fees,
• fund-of-fund fees,
• and performance bonuses for pension staff tied to alternative benchmarks.

The consultants pushed pensions toward higher-cost structures without generating corresponding value.

Benchmark Engineering and the Illusion of Alpha

The study indirectly supports another growing criticism:
consultants help create benchmark systems that make private assets appear superior even when they are not.

Public pension boards often rely heavily on consultant-created assumptions:

• expected return forecasts,
• private equity volatility estimates,
• diversification assumptions,
• correlation matrices,
• and benchmark constructions.

But private equity and private credit valuations are not continuously marked to market like public securities.

That creates artificially low volatility and artificially high Sharpe ratios.

The result is an illusion of diversification and alpha generation.

Consultants then use these distorted statistics to justify even larger allocations to alternatives.

The cycle feeds itself:

1. Consultants recommend higher alternatives.
2. Alternatives use smoothed valuations.
3. Smoothed valuations reduce apparent volatility.
4. Lower volatility “proves” diversification.
5. Consultants recommend even more alternatives.

Meanwhile, actual economic risk may be rising dramatically beneath the surface.

Consultants as Political Shields

The paper also highlights another important dynamic:
consultants serve as political protection for pension trustees.

Boards often lack investment expertise. Public trustees face political pressure and reputational risk. Hiring prestigious consultants allows boards to say:
“We relied on expert advice.”

But if the consultants themselves are embedded inside the private equity ecosystem, the entire fiduciary process becomes compromised.

The consultant becomes:

• the validator,
• the benchmark designer,
• the allocator,
• the gatekeeper,
• and effectively the distribution channel.

This creates a dangerous concentration of influence over public retirement assets.

The Real Damage

The real-world consequences are enormous.

Public pensions today often hold:

• 25% to 40% in alternatives,
• massive private credit exposure,
• illiquid real estate,
• infrastructure,
• leveraged buyouts,
• and opaque valuation-dependent investments.

At the same time:

• fees have exploded,
• liquidity risk has increased,
• transparency has collapsed,
• and benchmark accountability has deteriorated.

Yet many major public pensions have still underperformed simple passive public market portfolios over long periods.

The consulting industry helped engineer this transformation.

And according to this new academic evidence, they did so without delivering measurable value to pension beneficiaries.

The Bigger Question

The study ultimately raises a deeper fiduciary question:

If consultants systematically direct trillions toward higher-fee investments that:

• increase complexity,
• reduce transparency,
• create portfolio convergence,
• concentrate systemic risk,
• and fail to improve performance,

then whose interests are really being served?

Because increasingly, it appears the winners have been:

• private equity firms,
• private credit managers,
• alternative asset platforms,
• and the consultant industry itself.

Not retirees.

How America’s Largest Pension Consultants Became the Distribution Arm for Private Equity & Private Debt

Andonov, Aleksandar and Bonetti, Matteo and Stefanescu, Irina, Choosing Pension Fund Investment Consultants (March 10, 2026). Available at SSRN: https://ssrn.com/abstract=4306217 or http://dx.doi.org/10.2139/ssrn.4306217

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.

---

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.

---

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.

---

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

---

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.

---

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?

---

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).

---

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.

---

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