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:

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

The result:

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

---

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

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

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

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

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

• Blackstone Inc.
• KKR & Co.

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

Blackstone:Owns and finances hyperscale data center platforms globally

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

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

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

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

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

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

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

---

2. The Cost Stack: What Has to Be Built

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

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

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

---

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

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

In theory:

• The data center should pay for its incremental costs

In practice:

• Costs often get socialized across all customers

This happens through:

A. Rate Base Expansion

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

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

---

B. Demand Risk Shifting

If a data center:

• Delays construction
• Scales back
• Or exits

The infrastructure remains—and:

Residential and small business customers absorb the stranded costs

---

C. Special Contracts & Discounts

To attract data centers, states often allow:

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

Result:

Revenue shortfalls are made up elsewhere in the rate structure

---

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.

Private assets are:

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

This allows:

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

In other words:

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

---

The Incentive Structure: Everyone Gets Paid to Pretend

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

Private Equity and Private Credit Firms (2 and 20)

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

If assets were marked honestly:

• Performance fees would fall dramatically

Estimated impact:

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

---

Pension Staff

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

If losses were recognized:

• Bonuses collapse
• Career narratives collapse

Estimated impact:

• Hundreds of millions in staff compensation

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

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

---

The Quiet Alignment of Interests

This is not a conspiracy in the traditional sense.

It is something more durable:

A perfectly aligned incentive system

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

No one benefits from recognizing losses.

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

---

The “Artificial Alpha” Machine

This is how the illusion works:

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

This creates what can only be described as:

Manufactured outperformance

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

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

---

The Dangerous Endgame

The risk is not just accounting.

It is liquidity.

If pensions ever need to:

• Rebalance
• Pay benefits during stress
• Or sell assets

They will discover:

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

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

---

The Parallel to 2008—But Worse

In 2008:

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

Today:

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

Which means:

The eventual adjustment could be larger.

---

The Bottom Line

Public market signals are clear.

Private market accounting is not.

Between the two sits a gap of:

$300 billion to $500 billion in unrecognized pension losses

And behind that gap sits:

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

All dependent on one thing:

Not marking assets to reality.

---

Final Thought

This is not just a valuation issue.

It is a fiduciary issue.

Because when losses are hidden:

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

And eventually—

Someone else pays the price.

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

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

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

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

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

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

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

---

The Numbers: CFA vs CPA in Ohio Pensions

Let’s strip this down to reality.

Investment Staff (CFA Track)

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

Accounting / Audit Staff (CPA Track)

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

---

Same System. Same Assets. Completely Different Pay Logic.

Inside the same pension systems:

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

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

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

---

Who Controls the Truth?

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

The CFA Side Controls:

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

The CPA Side Controls:

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

Now ask the obvious question:

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

---

Private Equity: Where the Money—and Incentives—Explode

This gap didn’t happen by accident.

It coincides almost perfectly with the explosion of:

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

These assets:

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

And most importantly:

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

---

The Structural Problem

Ohio didn’t just create a pay gap.

It created a governance imbalance:

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

That imbalance leads to predictable outcomes:

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

---

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

When you see a system where:

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

You have to ask:

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

---

Why Ohio Teachers and Workers Should Care

Every dollar paid in:

• Excess fees
• Inflated valuations
• Underperforming private markets

…comes out of:

• Teacher pensions
• Public worker retirement security
• Taxpayer backstops

And yet:

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

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

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

---

A Simple Fix That No One Proposes

If Ohio were serious about fiduciary duty, it would:

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

Instead, the system doubles down on the opposite.

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

---

Bottom Line

Ohio pensions have made a choice:

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

Until that changes, nothing else will.

Misleading Claims of GIPS Compliance at Ohio STRS

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

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

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

The Illusion of Compliance

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

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

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

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

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

Target Date Funds: The Black Box Problem

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

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

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

That is a massive blind spot.

A proper IPS should require that:

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

Instead, what we see is the opposite:

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

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

The Missing Standard: Prohibited Transactions

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

This is where the rubber meets the road.

If an investment:

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

…it may violate ERISA’s core fiduciary rules.

Yet IPS documents almost never require vendors to certify that:

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

Why not?

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

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

CALPERS: A Case Study in IPS Failure

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

We did not even discuss the IPS.

Why?

Because it was effectively useless.

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

• Private equity
• Private credit
• Valuation methodology

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

And that valuation policy? A rubber stamp.

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

In other words:

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

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

Why Weak IPS Documents Persist

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

1. Plan Sponsors

Avoid liability by maintaining plausible deniability:

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

2. Consultants

Preserve flexibility:

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

3. Recordkeepers and Vendors

Maintain opacity:

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

4. Asset Managers

Avoid scrutiny of:

• Private market valuations
• Illiquid investments
• Complex fee structures

A real IPS would disrupt all of this.

What a Real IPS Should Do

A legitimate Investment Policy Statement should:

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

Most importantly, it should be enforceable.

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

The Bottom Line

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

In reality, they frequently function as:

A shield for fiduciaries—and a blindfold for participants.

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

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

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

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

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

Investment Policy Statements Crucial to Fiduciary Duty

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

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

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

The 7 Failures of CalPERS ESG

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

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

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

1. Dripping in Oil: Financing Climate Damage

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

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

Private equity allows CalPERS to:

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

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

---

2. Healthcare Abuse: Profits Over Patients

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

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

The Private Equity Stakeholder Project Hospital Tracker documents:

• Reduced staffing
• Higher costs
• Worse patient outcomes

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

They are its victims

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

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

3. Labor Abuse: Union Busting and Wage Pressure

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

In private equity, the reality is different.

Apollo portfolio companies have been linked to:

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

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

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

---

4. Higher Education Pressure and Political Influence

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

Apollo CEO Marc Rowan has been linked to:

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

These actions raise serious ESG concerns around:

• Academic freedom
• Governance independence
• Political interference

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

---

5. Ignoring Epstein-Linked Governance Risks

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

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

Subsequent disclosures have raised questions about:

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

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

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

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

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

---

6. Gaza, Human Rights, and Political Alignment

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

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

---

7. Supporting ICE Through Palantir Holdings

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

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

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

This has triggered protests from progressive groups, who argue:

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

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

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

Yet its largest capital allocations contradict those principles.

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

Apollo has many companies that many have privacy concerns with.

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

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

————————————-

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

---

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

.

---

The U.S. Department of Labor’s latest guidance—Technical Release 2026-01—has been framed as a narrow clarification on proxy voting. https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/technical-releases/26-01   That is not what it is.

It is something far more consequential:

• A major expansion of fiduciary status – mostly for consultants
• A political intervention into ESG and proxy voting
• And, most troubling, a quiet weakening of ERISA’s federal protections by deferring to weak state regulatory regimes on annuities and CIT’s

While it is great for Wall Street and the Insurance industry it is bad for participants and plans.  Taken together, this release does not reduce litigation risk for plan sponsors. It guarantees more of it.  

---

1. The Real Headline: Consultants Are Now Fiduciaries (Whether They Like It or Not)

The DOL makes one point unmistakably clear:
If you influence proxy voting, you are likely a fiduciary.

Under Employee Retirement Income Security Act of 1974, fiduciary status is functional—not based on titles or disclaimers. The DOL doubles down on that principle:

• Control over proxy voting = control over plan assets
• Advice on proxy voting for a fee = fiduciary investment advice
• Disclaimers “are not determinative”

This is not just about proxy advisory firms like ISS or Glass Lewis.

It directly implicates:

• Investment consultants designing proxy policies
• OCIO providers implementing governance frameworks
• Advisors influencing ESG or stewardship decisions

In practice, firms that have long operated in a gray zone—collecting fees while avoiding fiduciary responsibility—are now exposed.   And with more consultants being secretly owned by Private Equity, the exposure increases.

And once you are a fiduciary, you are also a party in interest.

That is where the litigation begins.

---

2. The Political Overlay: ESG Is the Target, Not the Rule

The release is tied directly to executive branch policy and makes repeated references to:

• “Non-financial” considerations
• “Politically motivated” proxy voting
• The need to focus solely on risk-adjusted return

This is not neutral guidance. It is a federal attempt to reshape proxy behavior without formal rulemaking.

The practical effect:

• ESG-related proxy votes become legally risky
• Documentation burdens increase dramatically
• Plaintiffs’ attorneys gain a roadmap to challenge votes

Ironically, in trying to suppress ESG influence, the DOL has created a new litigation framework around proxy decision-making.

---

3. The Most Dangerous Move: Weakening ERISA Preemption

Buried in the release is a far more consequential shift—one that has nothing to do with proxy voting.

The DOL argues that certain state laws regulating proxy advice are not preempted by ERISA, because:

A prudent ERISA fiduciary would never engage in the conduct those laws regulate.

This sounds harmless. It is not.

It represents a fundamental change in ERISA preemption doctrine.

---

Traditional ERISA Preemption

For decades, ERISA has operated on a simple premise:

• Federal law governs employee benefit plans
• State laws that “relate to” plans are broadly preempted
• The goal is national uniformity and participant protection

---

DOL’s New Framework

The DOL now suggests:

• State laws can coexist with ERISA
• As long as fiduciaries theoretically avoid triggering them

This creates a dual system:

• Strict federal duties (on paper)
• Weak, fragmented state regulation (in practice)

---

4. Why This Matters: Annuities and CITs

This is where the release intersects directly with the biggest risks in the retirement system.

A. Annuities

Insurance products—especially general account annuities—are governed primarily by state law.

Those laws:

• Do not require full transparency of spreads
• Allow discretionary crediting rates
• Often obscure underlying asset risk (private credit, mortgages, etc.)

Under the DOL’s logic:

• ERISA fiduciaries should act prudently
• Therefore weak state regulation is “good enough”

This is a dangerous fiction.

It effectively allows:

• Hidden insurer profits
• Undisclosed credit risk
• Single-entity exposure fixed annuities masquerading as “stable value”

---

B. Collective Investment Trusts (CITs)

The same issue exists—arguably worse—with CITs.

Regulated by:

• State banking authorities (e.g., Pennsylvania, New Hampshire, Maryland)
• The Office of the Comptroller of the Currency in some cases

These structures:

• Avoid U.S. Securities and Exchange Commission disclosure requirements
• Frequently embed:
  • Private equity
  • Private credit
  • Annuities and other Insurance products

Participants often have no idea what they own.

Again, the DOL’s position implies:

• ERISA fiduciaries should investigate these structures
• Therefore weak state oversight is acceptable

That is not regulation. That is abdication.

---

5. The Internal Contradiction: More Fiduciaries, Less Protection

This is the core problem.

The DOL is simultaneously:

Expanding fiduciary status

• More actors subject to ERISA
• More potential defendants

While weakening federal oversight

• Allowing state regimes to stand
• Accepting opacity in key investment structures

This creates the worst of both worlds:

• More liability
• Less transparency

---

6. Litigation Implications: A Plaintiff’s Roadmap

For those paying attention, this release is not a shield—it is a weapon.

It supports arguments that:

1. Consultants are fiduciaries

• Especially where they influence governance or structure

2. Advisory relationships trigger prohibited transaction scrutiny

• Fees + influence = conflicts

3. Discovery should expand

• Into proxy processes
• Into CIT underlying assets
• Into annuity crediting mechanisms

The logic aligns directly with Cunningham v. Cornell:

• Defendants bear the burden of proving exemptions
• Plaintiffs are entitled to discovery into hidden arrangements

---

7. The Bigger Picture: A Gift to Wall Street, Not Plan Sponsors

The DOL claims this guidance will reduce confusion and protect plans.

In reality, it does the opposite.

It:

• Expands fiduciary liability to more actors especially consultants
• Encourages reliance on opaque investment structures
• Preserves weak state regulatory frameworks
• Increases litigation exposure for plan sponsors

Meanwhile:

• Insurance companies continue to hide spreads
• Private equity remains embedded in CITs without disclosure
• Consultants collect fees while navigating newly expanded liability

---

Conclusion: More Risk, More Opacity, More Litigation

Technical Release 2026-01 is not a minor clarification.

It is a structural shift.

• It expands who can be sued
• While weakening the regulatory foundation meant to protect participants

And in doing so, it reinforces a troubling reality:

The modern retirement system is increasingly built on opaque structures, weak oversight, and conflicted intermediaries—with participants bearing the risk.

The DOL’s Fiduciary Rule Is Really a Gift to Wall Street—And a Trap for Plan Sponsors

DOL 401(k) Fiduciary Rule Enables Accounting Fraud 

On March 11, 2026  Senator Ron Wyden wrote a letter to the DOJ, Treasury, and the FBI concerning Leon Black the founder and CEO of Apollo https://www.finance.senate.gov/imo/media/doc/wyden_letter_to_doj-treasury-fbi_on_epsteinpdf.pdf    This in addition to the American Federations of Teachers letter to the SEC on Apollo lying about their ties with Epstein which was followed by legal suits  https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf  and another letter from the AFL-CIO

Senator Wyden makes a direct link between payments and Epstein trafficking operations “Epstein used the money you paid him to fund his sex trafficking operations.”  This was documented in a formal U.S. Virgin Island settlement and created financial linkage between Apollo leadership and Epstein criminal enterprise.

This is now a known, admitted-use-of-funds risk, not a reputational rumor Wyden repeatedly raises:

“extraordinary sums… may not have been exclusively for legitimate services”

Payments far exceeding normal advisory compensation

Lack of adequate explanation

$170 million paid to Epstein

~30x what major law firms were paid for similar work

If disclosures about these relationships were incomplete, this supports securities fraud exposure

Which directly ties to:  Stock drop litigation and Ongoing legal liability

Wyden raises Money Laundering issues :  Such as the use of Epstein as a “middleman” for payments to women and Payments routed through a “bogus 501(c)(3)” charity to: avoid disclosure and maximize deductions.  This introduces: criminal exposure risk  tax fraud exposure  systemic governance failure.

---

There is ample Evidence of Concealment and Intent.  Like the line Epstein performed tasks that “will need to remain unknown.”   Combined with: instructions to avoid public disclosure and structuring payments to hide identity.

Wyden states: his Investigation ongoing for nearly four years.  Requests for documents remain unanswered.  New DOJ disclosures increase concern.  If Leon Black does not respond: It creates a documented fiduciary trigger: Known risk + no mitigation Allegations formally raised  No response = no remediation

---

With Escalating legal exposure to pension plans with a Congressional inquiry, DOJ records ongoing litigation, this clearly Governance failure.  With this Apollo connection widely known since 2019 Public pension  Board awareness presumed.   And no plans with the exception of Pennsylvania have made even a small visible corrective action.  

---

The Pension Fiduciary Problem A pension fiduciary must ask:

• Are risks:
  • known? → YES
  • material? → YES
  • unresolved? → YES

👉 That creates:

A duty to reassess and potentially divest

---

“Senator Wyden’s letter transforms the Apollo/Epstein issue from a reputational concern into a documented, multi-dimensional risk: securities fraud, tax irregularities, money laundering exposure, and even national security implications. If Apollo leadership fails to respond, public pension fiduciaries are left holding an asset where the risks are known, material, and unresolved—a textbook case for divestment.”

---

“This is no longer about what Apollo did in the past. It’s about what pension fiduciaries know today—and whether they can justify continuing to hold an investment under active federal scrutiny with unanswered questions at its core.”

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

Divest From Apollo Now—Before Markets, Courts, or Congress Force It

Much has been written about retail investors getting trapped in private credit funds—gates, redemption limits, and liquidity mismatches at firms like Blackstone and Blue Owl.

But that narrative misses the real story.

The largest exposure of individual investors to private credit is not in retail funds at all.

It is inside the annuities they already own.

And it’s not even close.

---

The Hidden Portfolio Behind Annuities

U.S. life insurers hold roughly $4.4 trillion in annuity reserves. That is the pool of money backing:

• Fixed annuities
• Indexed annuities
• Pension Risk Transfer (PRT) annuities

What backs those promises?

Not Treasuries. Not traditional investment-grade bonds.

Increasingly, it is private, illiquid credit:

• Private placements
• Direct lending
• CLO tranches and structured credit
• Commercial and residential mortgage loans
• Real estate debt
• Asset-backed private lending

Let’s be clear:

A mortgage loan originated and held by an insurer is economically indistinguishable from private credit.

It is:

• Privately negotiated
• Illiquid
• Not mark-to-market
• Often internally or privately rated

Calling it “mortgage lending” instead of “private credit” is a labeling exercise, not a risk distinction.

---

Do the Math—Even Conservatively

Public data shows:

• ~$849 billion in private placements
• ~$788 billion in mortgage loans
• ~$1.7 trillion in private bonds

Even if you take a conservative approach and only count:

👉 Private placements + mortgage loans = ~$1.6 trillion

Annuities represent roughly two-thirds of insurer liabilities.

That implies:

👉 Hundreds of billions to over $1 trillion of private/illiquid credit exposure backing annuity investors

And that is before fully counting structured credit and internally rated assets.

---

Retail Private Credit Is Smaller Than You Think

The products dominating headlines:

• Non-traded BDCs: ~$230 billion
• Credit interval funds: ~$120 billion

Total: ~$350 billion

That is what the media calls “retail private credit.”

Compare that to annuities:

👉 3x–5x larger exposure—minimum
👉 Far less transparent
👉 Far less understood by investors

The industry is focused on the storefront window.

The real risk sits in the warehouse.

---

Apollo, Athene, and the Industrialization of Private Credit in Annuities

No firm better illustrates this transformation than Apollo Global Management and its insurance affiliate Athene.

Apollo’s model is simple:

1. Acquire or control an insurance balance sheet
2. Use it as a permanent capital vehicle
3. Allocate heavily to private credit, private mortgages, and structured assets
4. Capture spread between portfolio yield and credited rate

Athene is not an outlier—it is the model.

This is the financialization of retirement savings:

• Annuities become funding vehicles
• Private credit becomes the asset base
• Spread becomes the profit engine

From a participant perspective:

👉 You think you own a “guaranteed product”
👉 You actually own exposure to a leveraged, opaque credit portfolio

This is particularly acute in:

• Pension Risk Transfers (PRTs)
• Fixed indexed annuities
• Stable value products backed by general accounts and most separate account products

Where credit risk, liquidity risk, and valuation risk are all concentrated in a single entity.

---

The Illusion of Safety

Retail private credit investors know they are taking risk.

Annuity investors are told they are avoiding it.

They hear:

• “Guaranteed”
• “Principal protection”
• “Stable value”
• “Lifetime income”

But in reality, they are exposed to:

• Illiquid credit portfolios
• Discretionary crediting rates
• Opaque valuation processes
• No meaningful benchmark

And most importantly:

👉 No way to measure the spread being extracted from them

---

The Regulatory Blind Spot

Regulators focus heavily on:

• Retail fund liquidity
• Redemption gates
• Investor suitability

But largely ignore:

👉 Private credit embedded in annuity balance sheets

Why?

Because annuities sit in the insurance regulatory regime, not the securities regime.

That means:

• No daily NAV
• Limited disclosure
• Heavy reliance on internal or private ratings
• Minimal transparency into underlying holdings

In short:

👉 More risk, less visibility

---

The Real Risk Isn’t Gates—It’s Mispricing

Retail private credit funds can gate investors.

Annuities do something more dangerous:

👉 They hide risk through smoothing

• Losses are delayed
• Valuations lag reality
• Crediting rates are discretionary

The investor never sees volatility.

Until it shows up as:

• Lower crediting rates
• Reduced benefits
• Or in extreme cases, solvency stress

---

The Bottom Line

The financial media is focused on the wrong problem.

Retail private credit funds are:

• Visible
• Controversial
• Relatively small

The real giant is hidden:

👉 The U.S. annuity market is the largest conduit of private credit exposure to individual investors

And it operates with:

• Less transparency
• Less accountability
• Less investor understanding

Mortgage loans, private placements, structured credit—it’s all the same story:

👉 Illiquid credit risk wrapped in the language of safety

---

Appendix: CDS Pricing and the Missing Downgrade Trigger

One of the most important—and completely ignored—tools for evaluating annuity risk is credit default swap (CDS) pricing.

CDS spreads provide a real-time, market-based measure of insurer credit risk.

Yet:

• Plan sponsors rarely review CDS levels
• Regulators do not require it
• Contracts almost never include downgrade protection mechanisms

This is a critical failure.

---

Why CDS Matters

For firms like Athene, CDS spreads reflect:

• Exposure to private credit
• Structured asset risk
• Liquidity concerns
• Market perception of solvency

When CDS spreads widen, the market is signaling:

👉 Rising default risk

But annuity investors see none of this.

---

The Missing Protection: Downgrade Triggers

In institutional markets, credit-sensitive contracts often include:

• Downgrade triggers
• Collateral posting requirements
• Termination rights

Annuities and PRT contracts typically include none of these.

That means:

👉 Participants are locked into a single-entity credit exposure
👉 With no exit mechanism as risk rises

Which is why I believe most Annuity contracts are ERISA prohibited transactions in retirement funds

---

What Should Be Required

At a minimum:

• CDS monitoring as part of fiduciary review
• Contractual downgrade triggers
• Transparency into general account asset allocation
• Benchmarking against market credit yields

Without these protections:

👉 Annuity investors are effectively uncompensated credit risk providers

---

Final Thought

If CDS spreads are rising…

If private credit exposure is growing…

If downgrade protections are absent…

Then the conclusion is unavoidable:

👉 Annuities are not eliminating risk—they are concentrating and concealing it

CDX Financials Launch: The Daily Pricing Revolution That Exposes Annuity Risk

Why the Private Credit Meltdown May Take a While

Apollo’s garbage dump – Athene loading up on risk endangers retirees in PRT’s and other annuity investors

The 401(k) Private Credit Lie: 98% of the Risk Is Already There—Hidden Inside Annuities

TIAA Traditional Annuity Is a Prohibited Transaction

Annuity Risk measured by Credit Default Swaps (CDS)

Retirement Plans Must Demand Downgrade Provisions for Any Annuity

Why Offshore Structures and Weak State Regulation Make Most Annuities ERISA “Prohibited Transactions”

State Guarantee Associations behind Annuities are a Joke

Tomorrow marks a quiet but potentially transformative development in the credit markets: the launch of the CDX Financials index, administered by S&P Global.

At first glance, this may look like just another derivatives benchmark. It isn’t. For those of us focused on ERISA fiduciary risk, annuity opacity, and prohibited transactions, this is a major step toward finally quantifying what insurers have long kept hidden.

---

What Is CDX Financials—and Why It Matters

6

The CDX Financials index is a standardized basket of credit default swaps (CDS) referencing major financial institutions—insurers, asset managers, and banks. It will trade daily, providing transparent, market-based pricing of credit risk.

Critically, the index includes names central to the retirement system:

• Apollo Global Management (via Athene / Apollo Debt Solutions)
• Lincoln National Corporation
• Prudential Financial
• American International Group
• MetLife

These are not abstract entities—they are the core counterparties behind fixed annuities, stable value products, and pension risk transfer (PRT) deals.

---

Why This Changes the Game for Annuities

For years, insurers have argued that:

• Credit risk is “long-term” and not mark-to-market
• Crediting rates are sufficient proxies for safety
• Benchmarks like money markets or Hueler are “good enough”

That framework collapses with daily CDS pricing.

CDS spreads provide a real-time, market-based measure of default risk. When spreads widen, the market is signaling:

“This insurer is becoming riskier—right now.”

That matters because:

• Fixed annuities are 100% exposed to a single insurer balance sheet
• PRT annuities replace PBGC protection with insurer credit risk
• Participants are not compensated for that risk transparently

---

From Theory to Damages: A Litigation Breakthrough

5

You’ve already laid the groundwork in your CDS framework:
👉 https://commonsense401kproject.com/2025/10/29/annuity-risk-measured-by-credit-default-swaps-cds/

The CDX Financials index now enables something courts have struggled with:

A Clean Damages Framework

1. Observe CDS spread for insurer (e.g., Athene, Prudential)
2. Translate spread into implied credit risk premium
3. Compare to participant credited rate
4. Quantify under-compensation for risk

This directly supports:

• §404 prudence claims (failure to evaluate risk)
• §406 prohibited transaction claims (hidden spread extraction)
• Post-Cunningham v. Cornell burden shifting

In short:
CDS turns “opaque insurer discretion” into measurable economic harm.

---

Spillover Effect: Pricing the Unpriced

Even insurers not included in CDX will feel the impact.

Why?

• CDS markets are relative-value driven
• Traders will arbitrage spreads between index constituents and non-constituents
• This creates shadow pricing for the entire insurance sector

So even if a plan uses:

• A smaller insurer
• A separate account annuity
• A white-labeled stable value product

…it becomes increasingly difficult to argue:

“There is no observable market price for this risk.”

---

The Apollo / Athene Problem Comes Into Focus

7

This is where the implications become particularly acute.

Firms like Apollo Global Management have built insurance platforms (notably Athene Holding) that:

• Load general accounts with private credit and private mortgages
• Rely on internal or lightly regulated valuation frameworks
• Generate profits through spread capture, not disclosed fees

CDS pricing cuts through that opacity.

If Athene’s CDS widens while:

• Crediting rates stay flat
• Or lag peers

…it becomes powerful evidence that:

Participants are bearing increasing credit risk without compensation. https://commonsense401kproject.com/2026/03/26/apollos-garbage-dump-athene-loading-up-on-risk-endangers-retirees-in-prts-and-other-annuity-investors/

Jeffrey Epstein’s Pension Destruction Engine -Athene -Creating a new class of victims – over 200,000 pensioners

---

Implications for Fiduciaries—No More Excuses

With CDX Financials:

• Daily, independent credit pricing exists
• Comparable insurers are observable
• Risk-adjusted comparisons are feasible

Fiduciaries can no longer credibly claim:

• “We didn’t have a benchmark”
• “Risk was unobservable”
• “All insurers are roughly the same”

That argument was already weak. Now it’s gone.

---

What Comes Next

This is just the beginning.

Expect:

• Expert reports incorporating CDS curves and CDX spreads
• Discovery requests for insurer hedging and internal credit models
• Damages models tied to spread widening over time
• Increased scrutiny of:
  • PRT annuities
  • Stable value wrap providers
  • Fixed annuity options in 401(k)s

---

Bottom Line

The launch of CDX Financials is not just a market event—it is a transparency event.

For decades, insurers have operated in a space where:

• Credit risk was hidden
• Spreads were undisclosed
• Benchmarks were manipulated or meaningless

Now, with daily CDS pricing:

The market is finally putting a price on the risk that participants were forced to bear in the dark.

And once risk is priced…
liability is not far behind.

Retirement Plans Must Demand Downgrade Provisions for Any Annuity

Click to access 1482043_cdxfinancials45finallist.pdf

TIAA Traditional Annuity Is a Prohibited Transaction

Public pensions, normally the first to lead securities fraud cases, have been notably absent from the Apollo/Epstein stock drop litigation. That absence may reflect a deeper conflict: the same pensions that could sue Apollo for misleading disclosures are heavily invested in its private equity and private credit funds, where valuations remain opaque and untested.

In every major stock drop case, public pensions rush to the courthouse. This time, they haven’t—and that silence may be more revealing than any lawsuit. When your investment manager controls not just your stock portfolio but your private equity, your credit book, and your reported returns, suing becomes more than a legal decision—it becomes a threat to the entire system.”

Public pensions. have the largest losses, the best lawyers, and a fiduciary duty to act.
From Enron to Wells Fargo to Boeing, state and union pension funds have led the charge—often becoming lead plaintiffs in billion-dollar securities cases.

So when Apollo Global Management lost billions in market value amid new disclosures tied to Jeffrey Epstein, the expectation was simple: Public pensions would sue.  But so far, they haven’t. And that silence may tell you everything you need to know.

In 2019 and again in 2021, many institutional investors were told, in substance, that the Epstein problem at Apollo was largely personal to Leon Black and was being cleaned up.  Almost all public pensions blindly accepted Apollos’ work.  However, Epstein files released in February 2026 showed this to be a lie.  Teacher Unions AFT & AAUP’s complaint to the SEC directly challenges that sanitized version, arguing that the public record now suggests a broader and deeper institutional relationship. https://www.aft.org/sites/default/files/media/documents/2026/Letter_to_SEC_re_Apollo_Global_Management_February_17_2026.pdf

Apollo is now facing a Classic Stock Drop Case with multiple securities lawsuits alleging: Misleading disclosures about its relationship with Epstein.  Failure to fully inform investors about the scope of those ties. Material omissions that affected stock valuation https://www.bitget.com/amp/news/detail/12560605353269

This is standard Rule 10b-5 territory—the same legal framework used in nearly every major securities fraud case.  The stock fell sharply following new reporting and disclosures.
Law firms quickly filed class actions.   Everything about this case looks familiar—except one thing: The usual plaintiffs are missing.

Historically, public pensions dominate these cases: They step in because: They hold large positions. Courts prefer institutional investors as lead plaintiffs. They can drive litigation strategy.  But in the Apollo/Epstein litigation: No major public pension has stepped forward.That is not normal.  That is the story.

Apollo is not just another stock.  A private equity manager.   A private credit lender.  A core counterparty to pension systems. Limited partners in Apollo private equity funds. Investors in Apollo private credit vehicles.  They are clients, partners, and counterparties—not just shareholders.

More than 60 major US Public Pension plans  NY,CA,OH,FL,TX etc. have $ multimillion exposure to Apollo Private Equity and Private Credit –  See list at bottom https://commonsense401kproject.com/2026/03/23/divest-from-apollo-now-before-markets-courts-or-congress-force-it/

The risk to public pensions is valuation risk.  Private equity and private credit are: Not marked to market valued internally or with lagged models.   Litigation could expose overvaluation and conflicts leading to huge portfolio write downs, lower reported returns, and lower pension investment staff bonuses.  These billions in hidden losses would be a huge political issue for state pensions.

Contrast Apollo with prior Epstein-related cases: Banks like Barclays faced investor lawsuits and public pensions were willing to engage.  But Apollo is different.  Because Apollo sits at the center of: Private credit, Private equity, and Pension return assumptions.

The biggest risk to pensions is not the stock drop.  It is what discovery could reveal: Internal valuation practices, Private credit exposures, Conflicts between investor disclosures and internal knowledge.  

In every major securities fraud case, public pensions rush to the courthouse. This time, they haven’t.  And that silence is not accidental.  When your investment manager controls your private equity, your credit book, and your reported returns, suing them is no longer just a fiduciary decision—it’s a systemic risk.”

The Epstein files raised questions about power and accountability.  The Apollo lawsuits may answer a different question: Who is willing to act—and who is too exposed to speak?