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.
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.
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.
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:
Consultants recommend higher alternatives.
Alternatives use smoothed valuations.
Smoothed valuations reduce apparent volatility.
Lower volatility “proves” diversification.
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:
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
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 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.
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
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 1/10th of 1% of plans will probably help this stay under cover.
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.
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.
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.
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
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
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.
Enter the DOL: Bringing the Distortion into 401(k)s
Your prior work correctly identifies the next phase:
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.
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
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.
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
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:
Legislators → pass last-minute incentives
Utilities (e.g., LG&E) → benefit from massive load growth
Data center developers → lock in subsidized infrastructure
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
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
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.
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.
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
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.
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.
The CommonSense 401k Project 