Gina Hinojosa, Vikki Goodwin, Nathan Johnson, and Sarah Eckhardt have an extraordinary opportunity to expose hidden pension fees, private-market risks, politically directed investments, and taxpayer subsidies. They should begin investigating before waiting for new legislation.

By Christopher B. Tobe, CFA, CAIA
The CommonSense 401k Project | November 4, 2026

Texas Just Had a Political Earthquake

On November 3, Texas voters delivered a historic rejection of the state’s Republican leadership.

After more than three decades of Republican governors, Democrat Gina Hinojosa defeated Greg Abbott.

Democrat Vikki Goodwin defeated Lieutenant Governor Dan Patrick.

Democrat Nathan Johnson won the attorney general’s office.

And Democrat Sarah Eckhardt defeated Don Huffines for state comptroller.

The results are historic. But the real question is what these new officials will do with the powers voters have handed them.

Texas has some of America’s largest public pension systems, an enormous private equity and private credit industry, massive data-center development, and an increasingly complicated network of public subsidies, financial managers, political organizations, and investment consultants.

These issues are interconnected.

Texas public employees and teachers contribute to pension systems investing billions of dollars through Wall Street.

Private equity managers collect fees, carried interest, and other compensation.

Data-center developers seek favorable tax treatment and public infrastructure.

Financial firms influence investment policy through lobbying, campaign contributions, trade associations, and sometimes opaque political networks.

Meanwhile, state laws can require pension trustees to make politically directed investment decisions.

The new Texas leadership has an opportunity to investigate all of it.

The good news is that much of this work can begin without passing a single new law.

1. Governor Gina Hinojosa: Open the Books

The governor should begin with a comprehensive review of Texas public pension governance.

The Teacher Retirement System of Texas (TRS) and Employees Retirement System of Texas (ERS) manage enormous retirement obligations.

Texas also has major county, municipal, and other retirement systems.

Their investment programs increasingly include private equity, private credit, real estate, infrastructure, and other investments whose true costs and risks can be difficult for beneficiaries to understand.

Hinojosa should make public pension transparency an immediate administrative priority.

She can request comprehensive information from state agencies, appoint qualified and independent officials where vacancies and statutory appointment powers permit, and propose legislation requiring greater disclosure.

But the governor cannot simply order independent pension boards to abandon investments or rewrite existing contracts.

Texas public retirement systems have statutory and constitutional governance protections.

That makes transparency, independent oversight, and carefully drafted legislation essential.

Start with the real cost of private equity

The public deserves to know more than the management fee reported in a pension system’s annual report.

Private equity managers may collect:

• Management fees.
• Carried interest.
• Transaction and monitoring fees.
• Portfolio-company payments.
• Financing and subscription-line expenses.
• Affiliate fees.
• Fees generated through continuation vehicles.

These expenses can be deducted within investment partnerships or portfolio companies rather than appearing as straightforward checks written by the pension system.

Texas should require reporting of the total economic cost borne by each pension fund, without double counting.

A public pension system should not claim to have a low-cost investment program if its reporting omits material costs embedded in private funds.

2. Lieutenant Governor Vikki Goodwin: Use the State Auditor

One of the most important election results may be Vikki Goodwin’s defeat of Dan Patrick.

Why?

Because the lieutenant governor plays an important role in overseeing the Texas State Auditor.

The State Auditor operates under the Legislative Audit Committee, jointly chaired by the lieutenant governor and the speaker of the Texas House.

Under Chapter 321 of the Texas Government Code, the State Auditor has substantial authority to examine state agencies, public expenditures, and government programs.

Goodwin should make pension investment transparency and data-center subsidies priorities for independent audit review.

The Legislative Audit Committee must follow its statutory procedures, and Goodwin cannot unilaterally direct every audit.

But she can advocate an ambitious audit agenda.

Audit the pension consultants

Texas should examine the independence of firms hired to advise pension trustees and evaluate investment performance.

The central question is simple:

Who investigates Wall Street when the investigator also has Wall Street clients or owners?

Private equity-owned consulting firms, benchmarking providers, valuation specialists, and investment-cost evaluators should disclose their beneficial ownership and material commercial relationships.

A consultant should not be treated as independent merely because its contract describes it that way.

An independent audit should determine whether consulting firms have financial relationships with the managers whose performance or expenses they evaluate.

That includes indirect ownership interests and compensation arrangements.

The investigation should also determine whether consultants recommended benchmarks that made private investments appear more successful than appropriate public-market alternatives.

3. Attorney General Nathan Johnson: Enforce the Public’s Right to Know

Texas already has a remarkably strong statement of principle in Government Code Section 552.0225.

The statute recognizes that government investments are investments made for the people and that the public is entitled to information concerning them.

It specifically identifies categories of investment information that must be disclosed.

This is a powerful starting point.

Attorney General Nathan Johnson should review how public pension systems apply these disclosure requirements.

Are pension systems providing meaningful information about private equity fees?

Are they identifying the actual investment managers and controlling entities?

Are they disclosing investment agreements and financial terms where the law requires disclosure?

Are public-records exemptions being interpreted more broadly than necessary?

The attorney general has authority to issue certain legal opinions, represent state agencies, and enforce laws within the limits of the office’s statutory jurisdiction.

The AG should use those powers to strengthen compliance with Texas public-information requirements.

However, the attorney general cannot automatically compel disclosure of every confidential partnership agreement or initiate criminal prosecutions without the jurisdiction required by law.

That is why the proposed transparency legislation matters.

It would clarify which investment economic terms must be public and establish enforceable rights for pension beneficiaries and taxpayers.

Investigate actual misconduct, not merely unpopular investments

Where evidence supports possible fraud, undisclosed conflicts, deceptive reporting, or misuse of public resources, appropriate investigative authorities should examine it.

Investment losses alone do not establish wrongdoing.

Neither does a private equity manager’s political affiliation.

The proper standard is evidence.

But confidentiality should not become an excuse for avoiding accountability.

4. Comptroller Sarah Eckhardt: Follow the Tax Subsidies

Sarah Eckhardt may have one of the most important financial accountability jobs in Texas.

The comptroller is responsible for major state tax administration, accounting, revenue estimates, and fiscal reporting.

The office also has substantial responsibilities involving state economic-development incentives.

Texas is experiencing an extraordinary expansion of data centers, AI infrastructure, electricity generation, transmission projects, and related private investment.

Companies and developers may receive state or local incentives, tax exemptions, infrastructure support, or other public benefits.

The comptroller should create a comprehensive public accounting of these arrangements.

For each material data-center project, Texans should be able to determine:

1. How much private capital was invested?
2. How much state and local tax revenue was forgone?
3. What public infrastructure was required?
4. How much electricity and water will the facility consume?
5. How many permanent jobs were created?
6. What is the public subsidy per permanent job?
7. Who ultimately owns the project?

Existing confidentiality laws may prevent immediate release of certain taxpayer-specific information.

The comptroller should publish what current law permits and request legislation authorizing additional project-level disclosure.

The data-center question is bigger than tax breaks

Electricity demand is becoming a major economic issue.

Data centers can require substantial generation, transmission, and distribution investments.

If infrastructure costs are shifted to ordinary households and small businesses, the public may effectively subsidize private development through utility bills.

The state should independently examine these costs.

And the pension systems should disclose whether they invest in the companies financing the same projects.

Texans deserve to know whether they are subsidizing a data center as taxpayers, financing its infrastructure as ratepayers, and investing in it through their retirement savings.

Those relationships may be economically legitimate.

But they should not be invisible.

5. Railroad Commissioner Jon Rosenthal: Follow the Energy Infrastructure

Another important election result was the victory of Democrat Jon Rosenthal for the Texas Railroad Commission.

The commission regulates important parts of the state’s oil and gas industry.

Rosenthal has discussed energy costs, pollution, and data-center development.

His office can contribute to the broader investigation by examining matters within the commission’s jurisdiction, including relevant natural-gas infrastructure and pipeline issues.

However, the Railroad Commission does not generally regulate electric utility rates or approve all data-center construction.

Those responsibilities involve other authorities, including the Public Utility Commission, ERCOT, local governments, and environmental regulators.

The new administration should coordinate these agencies rather than pretend any single official controls the entire energy system.

6. Texas’s Anti-ESG and Anti-BDS Laws Need Reconsideration

Texas has adopted politically directed investment and contracting restrictions affecting financial companies and public pension systems.

Two particularly important statutes are:

Government Code Chapter 808, addressing investments in companies that boycott Israel.

Government Code Chapter 2271, imposing certain Israel-boycott-related contracting certification requirements.

Texas also has separate restrictions involving financial companies accused of boycotting energy companies.

These policies raise an important fiduciary question.

Should public pension trustees make investment decisions based on political lists established by state officials, or should they focus on investment risk, return, costs, and obligations to beneficiaries?

The new administration should review the economic consequences of these restrictions.

How much did compliance cost?

Were investment opportunities lost?

Did pension systems incur additional transaction expenses?

Were managers excluded for reasons unrelated to their expected investment performance?

The state should also examine whether these restrictions created political advantages for particular financial firms.

A consistent fiduciary standard

My position is straightforward.

Public pension assets should be managed for the benefit of participants and beneficiaries.

Trustees should be able to consider financially material environmental, social, governance, geopolitical, and human-rights risks.

But investment decisions should be supported by documented fiduciary analysis.

Neither anti-ESG politics nor an ESG label should substitute for independent investment judgment.

Texas should repeal unnecessary political investment mandates and replace them with transparent fiduciary standards.

This would require legislative action, not merely an executive order.

7. Private Equity’s Hidden Risks Deserve Their Own Investigation

Private equity and private credit create several transparency problems that are especially serious for public pension systems.

Valuations

Publicly traded stocks are generally valued using observable market prices.

Private assets often depend on models, assumptions, appraisals, and manager-controlled estimates.

This creates opportunities for delayed recognition of losses and artificially smooth reported returns.

Pension systems should disclose valuation methodologies, material overrides, appraisal delays, and differences between reported net asset values and actual secondary-market transaction prices.

Liquidity

Private investments may impose redemption restrictions, extended holding periods, and significant exit costs.

These risks become particularly important when pension systems need cash to pay retirement benefits.

Benchmarks

Private equity managers should not be permitted to justify their fees by comparing themselves with benchmarks that are easy to outperform.

Public pension systems should publish independent, low-cost, investable reference portfolios.

Conflicts

When the same financial organization advises pension trustees, manages investments, evaluates performance, and sells related products, conflicts may be difficult to identify.

The solution is full disclosure of ownership, compensation, and related-party transactions.

8. Texas Needs a Public Pension Inspector General

The existing State Auditor is an important institution.

But Texas should also consider creating an independent Office of Public Pension Inspector General.

The office should have authority to examine pension investment contracts, obtain relevant records, investigate conflicts, and report publicly.

Its leadership should be protected from arbitrary political removal.

Its budget should be sufficient to investigate complex private equity arrangements.

And it should be prohibited from hiring conflicted consultants as supposedly independent investigators.

The inspector general should coordinate with the State Auditor, attorney general, Pension Review Board, and other relevant agencies.

This would create a permanent accountability structure rather than relying on occasional political investigations.

9. I Have Prepared a Texas Legislative Model

The proposed Texas Public Pension Transparency, Accountability, and Data Center Risk Act of 2027 provides a starting point.

The discussion draft includes:

• Comprehensive private equity and private credit fee disclosure.
• Underlying investment and beneficial ownership transparency.
• Independent verification of valuations and performance benchmarks.
• Disclosure of political contributions, lobbying, and pension-related dark-money arrangements.
• Data-center electricity, water, tax subsidy, and infrastructure reporting.
• Cryptocurrency and digital-asset exposure reporting.
• Executive compensation and bonus transparency.
• Provider integrity investigations.
• Private enforcement rights for pension participants and appropriately qualified taxpayers.
• An independent pension oversight study.
• Repeal of specified anti-BDS investment and contracting restrictions.

These proposals would require review by Texas legislative counsel, particularly regarding sovereign immunity, pension trust protections, taxpayer standing, contractual rights, and constitutional limits.

But the bill provides a framework for closing disclosure gaps that existing administrative authority cannot fully address.

10. The First 100 Days: What the New Texas Leadership Should Do

The incoming officials should announce a coordinated financial transparency initiative.

Governor Hinojosa should request independent pension governance reviews, identify opportunities for appointments of qualified fiduciaries, and make transparency legislation an administration priority.

Lieutenant Governor Goodwin should seek Legislative Audit Committee approval for reviews of public pension expenses, consultant independence, and data-center subsidies.

Attorney General Johnson should review compliance with Texas investment-information disclosure requirements and examine legally supportable enforcement actions.

Comptroller Eckhardt should develop a statewide accounting of data-center tax expenditures, public subsidies, and economic-development commitments.

Railroad Commissioner Rosenthal should investigate relevant energy infrastructure and coordinate with utility and environmental regulators.

The agencies should establish clear timelines, preserve relevant records, and publish their findings.

An initial 100-day report could identify available data, major disclosure gaps, legal barriers, and recommended legislation.

Texas Has a Chance to Become the National Model

For decades, Wall Street has benefited from the complexity of public pension investing.

Private equity fees are difficult to understand.

Private credit valuations are difficult to verify.

Consultant relationships are not always transparent.

Data-center subsidies are spread across multiple government programs.

Political organizations can influence investment policy without ordinary pension beneficiaries understanding the financial consequences.

Texas has an opportunity to change that.

The November election delivered a new governor, lieutenant governor, attorney general, comptroller, and other statewide officials.

They should use the authority of their offices to begin asking questions immediately.

But they should also recognize the limits of executive power.

The strongest solution combines independent audits, lawful enforcement, public disclosure, and carefully drafted legislation.

The objective is not to replace one political investment agenda with another.

It is to restore accountability to the people whose money is being invested.

Follow the pension money.

Follow the private equity fees.

Follow the political contributions.

Follow the data-center subsidies.

Follow the electricity bills.

And when those financial trails intersect, require public officials and investment managers to explain who benefited and what it cost.

Texas voters have changed the people running the state.

Now those officials have an opportunity to change who gets to see the books.

---

Sources and further reading

• Texas Secretary of State — November 3, 2026 Election Results
• Texas Tribune — Democrats Seize Power in Texas
• Texas State Auditor — Authority and Responsibilities
• Texas State Auditor — Legislative Audit Committee
• Texas Comptroller — Agency Responsibilities
• Texas Pension Review Board — Statutes and Rules
• Texas Government Code §552.0225 — Public Investment Information
• Texas Government Code §552.0221 — Pension Employee and Trustee Compensation

Wilshire, CEM, Apollo’s indirect connections, questionable benchmarks, hidden investment costs, and Wall Street’s influence over Iowa’s public pensions deserve a genuinely independent investigation.

By Christopher B. Tobe, CFA, CAIA
The CommonSense 401k Project | November 4, 2026

Iowa Voters Just Created an Extraordinary Opportunity

Iowa voters did something remarkable on November 3.

They elected Democrat Rob Sand as governor, defeating Republican Zach Lahn and ending Republican control of the governor’s office.

They also elected Democrat Nate Willems as attorney general, defeating Republican incumbent Brenna Bird.

Sand has spent years as Iowa’s state auditor. Willems campaigned on protecting workers, consumers, and ordinary Iowans.

Now they have an opportunity to confront one of the most important financial accountability problems in the state.

The approximately $47 billion Iowa Public Employees’ Retirement System (IPERS) has been engulfed in questions about investment performance, hidden private equity fees, misleading benchmarks, executive compensation, and the independence of Wall Street consultants.

Meanwhile, Iowa is handing out substantial tax incentives to data centers operated by Google, Microsoft, Meta, and others.

These may appear to be separate stories.

They aren’t necessarily.

Public pension money flows into private equity, private credit, real estate, and infrastructure. Those same financial markets increasingly finance data centers, electricity generation, transmission, and artificial intelligence infrastructure.

Iowa taxpayers help subsidize the facilities.

Iowa ratepayers help support the electrical infrastructure.

Iowa public employees supply billions of dollars to Wall Street investment managers.

And the investment managers collect fees.

The new governor and attorney general should investigate both sides of this transaction.

The important question is not whether every investment or tax incentive is improper.

It is why the public cannot easily determine where all the money goes.

Timothy Tucker Has Already Done Much of the Investigative Groundwork

One of Iowa’s most important independent investigative journalists is Timothy C. Tucker, founder of Restoring Democracy’s Promise.

Tucker has produced a remarkable series of investigations into IPERS, using court documents, payroll records, public-records requests, and government filings.

His reporting deserves the attention of the incoming Sand administration.

A former IPERS investment risk and operations officer, Rich Wiggins, filed litigation alleging serious problems involving the pension fund’s investment risk reporting, performance benchmarks, management fees, and executive compensation.

Wiggins alleged that substantial portions of the portfolio were benchmarked in ways that made underperformance difficult or impossible to identify.

He also alleged that the fund understated the true costs of private-market investments.

These are allegations in pending litigation, not established findings of wrongdoing.

But the lawsuit survived an important motion to dismiss in April 2026.

The issues warrant an independent examination.

Tucker’s April investigation, Newly Obtained Amended IPERS Lawsuit Expands Allegations on Risk, Fees, and Benchmarking, describes the allegations in detail.

His May follow-up, A Resignation Is Not an Audit, makes another important point.

Changing pension executives does not establish whether the underlying investment practices were appropriate.

Former IPERS CEO Greg Samorajski resigned in 2026, and other senior personnel changes followed.

But personnel changes are not a substitute for forensic accounting.

The public deserves an investigation of the money, not merely an explanation of the personnel changes.

Tim McGlinn Exposes the Benchmarking Problem

Investment professional Tim McGlinn, CFA, writing at The AltView, has produced some of the most important independent analysis of IPERS investment performance.

His April 24 article, Motion Denied! IPERS Update, Featuring Wilshire and CEM Benchmarking, identifies several troubling practices.

Among them:

• Private-market investments reportedly benchmarked against their own returns, potentially eliminating meaningful tracking error.
• Passive international equity investments appearing to generate persistent benchmark outperformance.
• Hedge-fund exposures compared against Treasury bills despite substantially different risks.
• Investment overlays that complicate the interpretation of asset-class returns.
• Cost comparisons that exclude significant categories of private-market expenses.

The self-benchmarking problem is especially serious.

Imagine a private equity portfolio loses 20%.

If the benchmark is effectively the portfolio’s own return, the investment can lose money while reporting little or no underperformance against that benchmark.

The pension system can appear to have met its performance standard even when its members have suffered significant investment losses.

This is not a meaningful test of whether private equity justified its costs and risks.

McGlinn also argues that a conventional stock-and-bond reference portfolio provides a much less flattering comparison with IPERS’s reported results.

Such comparisons require careful matching of risk, asset allocation, and time periods. But that is precisely why the pension system should publish independent, investable reference benchmarks alongside its internally constructed policy benchmarks.

A benchmark should measure performance. It should not manufacture success.

Wilshire: Who Is Really Advising Iowa’s Pension Fund?

IPERS identifies Wilshire as its investment management consultant.

Wilshire has worked with IPERS for decades.

In 2021, Wilshire announced an expanded six-year contract covering private markets advisory services and risk analytics.

That creates an obvious question.

If IPERS’s investment benchmarks and risk reporting have serious weaknesses, what did its consultant know, recommend, review, or approve?

Wilshire is also no longer simply an independent consulting firm owned by its employees.  It is tied to Apollo Global Management in its structure a manager for IPERS and the owner of a leading insurer in the state Athene.

When a private-equity-owned consultant evaluates private equity investments, what conflicts exist between its owners’ commercial interests and its responsibility to pension beneficiaries?

Wilshire’s ownership and potential conflicts should be fully disclosed.

The review should identify:

• Current beneficial owners and ownership percentages.
• Any Apollo-related indirect economic interests.
• Material relationships between Wilshire, its owners, and IPERS investment managers.
• Compensation from private equity firms and other institutional clients.
• The role Wilshire played in constructing, reviewing, or approving IPERS benchmarks.

CEM Benchmarking: How Can Iowa Be So Cheap When Its Fees Are So High?

The second consulting relationship deserving scrutiny is CEM Benchmarking.

IPERS has used CEM to compare its investment expenses with those of other public pension systems.

McGlinn reports that CEM repeatedly characterized IPERS as exceptionally low-cost.

But the problem is what gets counted.

According to reporting on IPERS’s December 2025 investment board meeting, the system’s reported investment costs of approximately 13.7 basis points could increase to roughly 70 basis points when estimated private equity and private credit incentive fees and carried interest were included.

That is an extraordinary difference.

On a $47 billion portfolio, those two expense rates imply:

Expense measure	Annualized cost
13.7 basis points	$64.4 million
70 basis points	$329.0 million
Difference	$264.6 million

These are illustrative calculations using a common $47 billion asset base, not independently audited IPERS expense totals. The 70-basis-point figure includes estimated costs and may not be directly comparable with the narrower reported measure.

Nevertheless, the difference is enormous.

A cost comparison that excludes carried interest, incentive fees, and underlying private equity expenses can make an expensive investment program look inexpensive.

CEM’s methodology may have been applied consistently within its peer group. But that does not answer whether the comparison captures the full economic cost borne by Iowa pension beneficiaries.

There is also an ownership issue.

CEM has been linked to McKinsey, one of the world’s most influential consulting firms, which maintains substantial relationships throughout the private equity industry.

Iowa should establish CEM’s current ownership, relevant commercial relationships, and the independence of its methodology.

Who evaluates the evaluators?

That question should be central to the new administration’s pension investigation.

The Bonus Problem: Two Basis Points of Outperformance

Timothy Tucker uncovered another extraordinary issue.

IPERS Chief Investment Officer Sriram Lakshminarayanan received three consecutive annual payments of $25,000 categorized as exceptional job performance pay, according to Tucker’s examination of payroll records.

For fiscal 2025, IPERS reported an investment return of 9.87%.

Its policy benchmark returned 9.85%.

That is an excess return of just two basis points.

On $47 billion, two basis points represents approximately $9.4 million, although that arithmetic does not establish that the excess return caused any particular bonus.

The larger issue is the compensation formula.

If investment managers can influence the benchmarks used to evaluate their performance, and those benchmarks influence their compensation, an obvious conflict arises.

Tucker’s August investigation, The Formula Behind the $25,000: What Iowa’s Next Governor Inherits, examines the compensation documents.

McGlinn subsequently connected the incentive structure to the broader benchmark debate in IPERS: From Fake Outperformance to Real Cash Bonuses.

An independent investigation should determine whether the compensation system rewarded genuine investment skill or results measured against insufficiently demanding benchmarks.

This does not require assuming that any executive violated the law.

It requires independently examining the benchmarks, performance calculations, and compensation approvals.

Iowa DOGE: Was Pension Privatization Becoming a Business Opportunity?

The pension controversy extends beyond investment management.

Former Governor Kim Reynolds established an Iowa DOGE task force to recommend government efficiency measures.

One participant was Kathy Kay, an executive vice president at Principal Financial Group.

The task force recommended replacing traditional IPERS participation for new employees with a defined-contribution-style retirement arrangement.

Principal is a major provider of 401(k) and other retirement products.

That combination deserves scrutiny.

Tucker’s August 2025 investigation, Hidden Conflict Could Hand $42.9 Million to Iowa Task Force Member’s Firm, modeled the potential financial consequences.

His analysis estimated that the proposed arrangement could generate approximately $143 million in investment-management fees over ten years.

Under an illustrative scenario in which Principal obtained 30% of the business, approximately $42.9 million could flow to Principal.

Those figures are modeled possibilities, not established revenues or evidence that Principal would win the business.

But the conflict question remains.

Why was an executive of a retirement-services company participating in a government process that could create new business opportunities for companies in that industry?

Were the relationships disclosed?

Were conflicts evaluated?

Was an independent economic analysis performed?

The new governor should preserve traditional pension benefits while independently evaluating any proposal that shifts investment and longevity risks from the pension system onto individual public employees.

Iowa’s Anti-ESG Network Reaches Directly Into IPERS

Another connection deserves attention.

Iowa Treasurer Roby Smith is affiliated with the State Financial Officers Foundation, or SFOF.

SFOF has been an important organization in the national campaign against ESG investing.

But Smith is not simply a politician expressing views about investment policy.

He also serves as an ex officio voting member of the IPERS Investment Board.

That board exercises meaningful authority over pension investment policy and investment service providers.

This creates a direct institutional connection:

SFOF → Iowa Treasurer Roby Smith → IPERS Investment Board → public pension investment oversight.

Smith was reelected in November 2026, meaning the incoming Sand administration will inherit this relationship.

I have previously examined similar connections involving Ohio and Kentucky.

In my article, Allison Ball’s ESG Shell Game: Follow the Money From Kentucky to KKR to SFOF, I argued that anti-ESG politics should not become a distraction from more fundamental investment conflicts.

The same principle applies in Iowa.

If SFOF-affiliated officials believe pension funds should not use retirement money for political objectives, they should apply that standard consistently.

That means examining private equity managers, private credit firms, infrastructure investors, and investment consultants—not merely public-market managers criticized for ESG policies.

The next investigation should compare SFOF’s corporate sponsors with IPERS investment managers and consultants.

It should examine relevant political contributions, meetings, contracting decisions, and recusals.

Membership in SFOF is not evidence of improper conduct.

But public pension governance should be transparent enough to establish whether political relationships affected financial decisions.

Apollo, Athene, and Iowa’s Insurance Industry

Iowa is also an important insurance state.

Athene, the retirement-services and annuity company associated with Apollo Global Management, has substantial Iowa operations.

Apollo’s ownership of Athene places the company within the broader private equity and insurance ecosystem that has attracted increasing scrutiny over private credit, affiliated investments, and opaque valuations.

Athene’s Iowa employment footprint makes it an important economic stakeholder.

Iowa’s new administration should examine how the state’s insurance industry, private credit investments, and public pension assets interact.

The Wilshire-Motive-Apollo relationship adds another reason to require complete ownership disclosures.

The inquiry should also identify any material political contributions or lobbying by relevant firms and their executives, distinguishing individual contributions from corporate spending and verified relationships from speculation.

Iowa should not wait for another financial crisis before requiring meaningful transparency from institutions managing long-term retirement promises.

Iowa’s Data-Center Gold Rush: Follow the Taxpayer Money

The second major investigation should focus on Iowa’s data centers.

Google, Microsoft, Meta, and other companies have invested billions of dollars in Iowa facilities.

These investments provide economic benefits, including construction activity, permanent employment, and tax revenues.

But Iowa also offers significant tax exemptions and other incentives.

Qualifying data centers can receive exemptions involving equipment, cooling infrastructure, electricity, and other eligible purchases, subject to statutory conditions and limitations.

The state should publish the value of these incentives by project.

How much tax revenue is Iowa giving up?

How many permanent jobs are created?

How much electricity and water do these facilities require?

Who pays for the transmission lines and power generation necessary to support them?

And are ordinary households and small businesses subsidizing infrastructure built primarily for large technology companies?

These questions become particularly important as artificial intelligence accelerates electricity demand.

The Sand administration should commission an independent statewide data-center cost-benefit audit.

It should calculate the total public subsidy per permanent job and identify which infrastructure costs are paid by developers, utilities, taxpayers, and ratepayers.

The point is not to declare every data center a bad investment.

It is to determine whether the public is receiving a fair return.

Now Follow the Pension Money Into the Same Industry

As of March 2025, IPERS held approximately $44.7 billion in assets, with roughly 31% invested in private markets.

That included approximately:

• $7.9 billion in private equity.
• $3.1 billion in private real assets.
• $2.8 billion in private credit.

IPERS investment records identify relationships with major alternative-investment managers, including Blackstone, Brookfield, Ares, KKR, and others.

These firms participate in financial markets that increasingly fund digital infrastructure, electricity generation, transmission, and data centers.

This does not establish that a particular IPERS fund financed a particular Iowa data center.

That is precisely the disclosure problem.

A pension report identifying an investment as private equity or infrastructure tells beneficiaries little about the underlying businesses and projects.

IPERS should publish a look-through report identifying its direct and indirect exposures to data centers, AI infrastructure, power generation, utilities, digital infrastructure, and related private credit.

For each material exposure, the public should be able to identify the manager, underlying assets, investment value, leverage, valuation method, fees, carried interest, and relevant conflicts.

Iowa taxpayers deserve to know where their tax incentives go.

Iowa public employees deserve to know where their pension contributions go.

Sometimes those financial trails may intersect.

That is why the investigations should be conducted together.

What Governor Sand and Attorney General Willems Should Do

The election creates an opportunity, but the governor and attorney general do not possess unlimited authority over IPERS, private contracts, or local economic-development arrangements.

The Republican-controlled Legislature will remain an important obstacle to statutory reform.

The new administration should therefore begin with powers already available under Iowa law, pursue voluntary disclosure, and seek legislation where necessary.

I would recommend seven immediate priorities.

1. Commission an independent IPERS forensic review.

Examine investment performance, benchmarks, risk reporting, total economic costs, consultant conflicts, and executive compensation. Use investigators with no material financial relationship to the managers being evaluated.

2. Review Wilshire and CEM Benchmarking.

Require complete ownership and conflict disclosures. Independently evaluate the methodologies used to measure private-market performance and costs.

3. Investigate the Wiggins allegations.

Preserve relevant records and review the issues raised in the pending litigation, while respecting the judicial process and the rights of all parties.

4. Audit Iowa’s data-center subsidies.

Publish project-level public costs, permanent jobs, electricity and water requirements, infrastructure obligations, and subsidy effectiveness, subject to lawful confidentiality protections.

5. Require private-market look-through transparency.

Identify underlying investments, fees, carried interest, leverage, valuation assumptions, and material data-center and energy exposures.

6. Review political and commercial conflicts.

Examine the Iowa DOGE pension proposal, Principal-related conflict questions, SFOF relationships, political spending, and investment-provider contracting.

7. Pursue an Iowa Public Pension Transparency and Accountability Act.

The legislation should establish enforceable disclosure requirements, independent valuation and benchmarking, whistleblower protections, meaningful conflict rules, and appropriate judicial remedies.

An independent public pension inspector general would be a particularly important structural reform.

The Election Was Only the Beginning

Rob Sand has spent years presenting himself as an independent-minded auditor willing to challenge government waste and misconduct.

Nate Willems has promised greater attention to workers and consumers.

Now they have an opportunity to apply those principles to one of Iowa’s largest financial institutions.

They need to look closer at  IPERS executives, Wilshire, CEM, Principal, Apollo, demand records, examine conflicts, independently verify performance and expenses, and publish the findings.

The public pension system belongs to Iowa’s public employees and retirees.

The tax revenue belongs to Iowa’s taxpayers.

The electrical infrastructure serves Iowa’s communities.

And the government officials overseeing these resources owe the public accountability.

Timothy Tucker and Tim McGlinn have already identified important questions.

The new administration has an opportunity to turn those questions into a comprehensive, independent examination.

The CommonSense lesson from Ohio, Kentucky, and now Iowa is simple:

Follow the pension money.

Follow the private equity fees.

Follow the consultants.

Follow the political relationships.

Follow the data-center subsidies.

And follow the electricity bills.

In Iowa, follow the money twice—once from taxpayers into the data centers, and again from public employees through Wall Street.

If those trails intersect, the public deserves to know who benefited, what risks were taken, and how much was paid along the way.

---

Selected sources and further reading

• Timothy C. Tucker, Newly Obtained Amended IPERS Lawsuit Expands Allegations on Risk, Fees, and Benchmarking, April 2026.
• Timothy C. Tucker, A Resignation Is Not an Audit, May 2026.
• Timothy C. Tucker, The Formula Behind the $25,000, August 2026.
• Timothy C. Tucker, Hidden Conflict Could Hand $42.9 Million to Iowa Task Force Member’s Firm, August 2025.
• Tim McGlinn, Motion Denied! IPERS Update, Featuring Wilshire and CEM Benchmarking, April 2026.
• Tim McGlinn, IPERS: From Fake Outperformance to Real Cash Bonuses, September 2026.
• Tim McGlinn, Two-ish Percent Is the New 4–6%: Private Equity’s New World, Featuring Wilshire, October 2026.
• IPERS FY2025 Annual Comprehensive Financial Report.
• Iowa Public Radio — 2026 election coverage.
• The CommonSense 401k Project, Kentucky’s Pension Fee Bounty: Who Investigates Apollo When Apollo Is Connected to the Investigator?.

Ohio’s new Democratic governor faces a Republican legislature. But she can begin investigating the billions flowing through public pensions, Wall Street, political networks and private infrastructure without waiting for legislative approval.

By Christopher B. Tobe | The CommonSense 401k Project | November 4, 2026

Amy Acton’s victory over Vivek Ramaswamy represents more than a change in Ohio’s governor’s office.

It creates an extraordinary opportunity to investigate a financial and political system I have been documenting throughout 2026: the intersection of Ohio’s public pensions, private equity, excessive investment-staff compensation, politically connected Wall Street firms, data centers, cryptocurrency and questionable investment performance reporting.

Republicans still control the Ohio legislature. That will make comprehensive pension transparency legislation difficult.

But Acton does not have to wait for the legislature to begin asking the questions Ohio’s political establishment has avoided.

Who is making money from Ohio’s public pensions? Who is measuring the investment performance? Who decides whether pension executives deserve enormous bonuses? And why is so much of the underlying financial information hidden from the teachers, retirees and taxpayers whose money is at risk?

As someone who began investigating pension corruption in Kentucky in 1997, I have seen how pension scandals can survive changes in political leadership. The investment managers stay. The consultants stay. The contracts stay secret. And the money keeps flowing.

Ohio’s new governor has an opportunity to interrupt that cycle.

Ohio STRS Had around 100 staffers making more than the Governor in a rigged bonus system.

Perhaps the strongest reason for Acton to initiate an independent investigation is the academic research I discussed in July:

New Academic Paper: Ohio STRS Had Two Performance Numbers—And Used the Better One to Pay Bonuses

Ohio STRS Responds to Charges It Gamed Its Own Bonuses—With More Games

Researchers Allen Mendenhall and Dan Sutter examined 20 years of State Teachers Retirement System of Ohio performance reporting.

Their findings raise serious questions about how STRS measures investment performance and compensates its investment staff.

• 4 STRS employees earned more than $600,000.
• 20 earned more than $400,000.
• 49 earned more than $300,000.
• 85 earned more than $200,000.

According to their analysis:

• STRS’s reported investment return exceeded the authors’ independently calculated return based on audited financial information in 19 of 20 fiscal years, from 2003 through 2022.
• The average annual difference was approximately 0.33 percentage points.
• The authors estimated a cumulative difference of approximately $9.3 billion when compounded over the period.
• The more favorable internally reported performance figures were used in determining investment-staff bonuses.

Why should investment employees receive substantial bonuses while retired teachers have experienced years of inadequate cost-of-living adjustments?

STRS responded by hiring a consultant GCA who justified excessive bonuses in other plans around the county. The Consultant Behind the Public-Pension Pay Machine: GGA Helped Legitimize Excessive Pay at CalPERS, STRS Ohio and Ontario OMERS

Acton’s first pension investigation should demand a compensation review of the over 100 public pension officials who make more than her $180,203 a year.

.

Ohio Teachers’ Billions, Apollo and the Epstein Questions

In February, I published:

Epstein, Apollo and Ohio Teachers’ Billions

And:

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

Ohio has devoted considerable attention to Leslie Wexner’s historical relationship with Jeffrey Epstein.

But public pension oversight should also examine Apollo Global Management, whose former CEO Leon Black paid Epstein more than $150 million for purported financial and other services.

Those payments are documented. They do not establish that Ohio pension investments were used to fund Epstein or that every Apollo investment was improper.

The fiduciary questions concern investment due diligence, reputational risk, conflicts, fees and the adequacy of disclosures.

STRS has invested with Apollo-managed vehicles.

In 2021, the Ohio Retired Teachers Association commissioned a forensic review titled The High Cost of Secrecy.

That review estimated approximately $8.6 billion in alternative-investment underperformance against selected benchmarks and more than $420 million annually in previously unreported alternative-investment fees.

Acton’s commission should seek a complete accounting of Ohio pension investments with Apollo and other major alternative managers, including fees, carried interest, returns, fund structures, due diligence and investment committee decisions.

It should examine how the systems responded when the Black–Epstein relationship became public.

It should also examine the broader treatment of STRS reform trustees Wade Steen and Rudy Fichtenbaum, including the investigations and litigation surrounding their efforts to challenge existing investment practices.

The important distinction is between legitimate investigation of conflicts and proof of misconduct.

Pension trustees should be encouraged to ask difficult questions about Wall Street—not discouraged from examining billions in public retirement assets.

Ramaswamy Lost. The Financial Networks Still Deserve Scrutiny.

Throughout 2026, I examined relationships involving Vivek Ramaswamy, private equity, the State Financial Officers Foundation, Ohio officials, pension governance and financial interests in emerging industries.

Among those investigations:

Vivek Ramaswamy, Private Equity and Ohio’s Public Pensions

Ohio STRS: Follow the Money—and Follow QED’s Seth Metcalf, SFOF and Ramaswamy Connection

Ramaswamy, Crypto Money, Data Centers, Jeffrey Epstein and Ohio Pensions

Ramaswamy’s defeat does not make those questions irrelevant.

The political and financial relationships involving pension managers, public officials, campaign contributors, energy companies and private-market investors deserve examination regardless of who wins an election.

The controversy surrounding QED and Seth Metcalf is particularly revealing.

Ohio authorities focused considerable attention on reform trustees associated with a proposed investment concept involving QED.

Yet the central point in my reporting was that STRS ultimately invested no pension money with QED and paid it no investment management fees.

That does not, by itself, resolve whether the trustees’ conduct complied with fiduciary requirements.

But it does raise a legitimate question of investigative priorities.

Why did a proposal that attracted no investment capital receive such intense scrutiny while enormous existing private-market allocations and their underlying fees remained much harder for beneficiaries to examine?

Acton’s administration should request a transparent accounting of the evidence, costs and outcomes of prior pension investigations, while respecting the independence of the Attorney General and courts.

Ohio needs the same investigative intensity applied to billions in existing Wall Street investments that it applied to the people questioning those investments.

Ohio’s Data Center Money Machine May Be the Next Major Pension Problem

One of my most important Ohio investigations concerned the rapidly expanding data center economy:

Ohio’s Data-Center Money Machine: Husted, Ramaswamy, Faber, SFOF and Wall Street

Data centers bring together several risks that are usually examined separately:

Private equity.

Private credit.

Real estate.

Energy infrastructure.

Electricity rates.

Water consumption.

Tax incentives.

Cryptocurrency.

Political contributions.

Public pensions.

These risks can overlap in ways that conventional pension reporting does not reveal.

For example, Ohio teachers may own publicly traded shares of major technology companies driving artificial intelligence demand.

Their pension funds may simultaneously invest in private equity and infrastructure partnerships financing data centers, electricity generation, transmission facilities and other supporting businesses.

That does not prove that any particular private investment is imprudent.

But it creates the potential for concentrated economic exposure across investments that appear diversified on a pension asset-allocation report.

STRS reported approximately $103 billion in investments as of June 30, 2025, including substantial allocations to alternative investments and real estate.

Those allocations are not equivalent to data center exposure. The precise look-through exposure remains a question requiring investigation.

Acton should require executive agencies to disclose their lawful records concerning data center incentives, electricity infrastructure commitments and public subsidies.

Her pension commission should then request corresponding investment information from STRS, OPERS and the other retirement systems.

The questions are straightforward.

Who owns the facilities?

Which pension funds are financing them?

Who receives the tax abatements?

Who pays for transmission upgrades?

Who pays for the water?

What happens if projected AI demand does not materialize?

What happens when a private credit loan must be refinanced at higher interest rates?

And what happens if a data center developer fails after the public has already paid for supporting infrastructure?

Ohio should also examine pension exposure to cryptocurrency exchanges, mining companies, digital-asset lenders and tokenized investment vehicles.

These are not merely technology questions.

They are questions about whether Ohio taxpayers and pension beneficiaries are financing overlapping layers of risk while Wall Street collects fees at every stage.

Are Ohio Teachers Financing the Privatization of Their Own Schools?

Another investigation illustrates why private equity transparency should extend beyond investment performance:

Ohio Teachers Are Financing the Destruction of Their Own Public Schools

Ohio teachers contribute to a retirement system that invests in private equity firms.

Some of those firms own companies providing outsourced educational services, including transportation, staffing, special education services and education technology.

The relationships I examined included firms such as Leonard Green, EQT and Vistria and businesses operating in education-related markets.

This creates a potential conflict between the economic interests of public school employees and the commercial incentives of some businesses financed through their retirement investments.

The mechanism is troubling.

Teachers contribute to STRS.

STRS invests in private equity.

Private equity owns companies selling services to school districts.

Those businesses may profit from outsourcing activities previously performed by public employees.

Taxpayers then pay the private contractors.

That does not establish that a specific STRS investment caused a teacher layoff, reduced wages or damaged an Ohio school district.

But it does justify an investigation into the underlying investments, school district contracts, labor effects and fees.

An independent pension commission should examine whether the retirement systems adequately consider such financially material risks and conflicts when investing in businesses whose commercial strategies intersect with the public services their beneficiaries provide.

What Acton Can Actually Do Without the Legislature

Ohio’s pension systems are independent statutory entities.

Governor Acton cannot simply order their trustees to surrender every private equity contract, rewrite compensation policies, remove investment managers or create new private rights of action.

Those actions may require legislation or the exercise of existing authority by the appropriate pension boards and oversight officials.

But she can act.

I recommend an executive order establishing an Ohio Public Pension Transparency and Investment Risk Advisory Commission within her first 30 days.

The commission should include independent forensic accountants, pension investment specialists, retirees, public-records experts and individuals with experience examining private-market valuations.

It should have no financial ties to the managers or consultants under examination.

Its mandate should include:

1. A forensic review of STRS performance calculations and investment-staff bonuses, including the Mendenhall–Sutter findings.
2. An examination of GGA and other pension consultant compensation and conflicts.
3. A complete requested accounting of private equity and private credit fees, carried interest, underlying holdings and valuation practices.
4. A review of Apollo and other major investment managers’ due diligence, economic terms and material conflicts.
5. An investigation of direct and indirect pension exposure to data centers, cryptocurrency and related infrastructure.
6. An examination of pension investments in companies contracting with Ohio public schools.
7. A public report on political contributions, placement agents, lobbying and pension-related charitable payments, using legally obtainable information.
8. Recommendations for a permanent independent pension Inspector General and enforceable transparency legislation.

The governor can direct agencies under her authority to cooperate within the limits of law.

She can request participation by the pension systems.

The First 180 Days: A Test of Acton’s Commitment

Days 1–30: Establish the independent commission, adopt strict conflict-of-interest standards and formally request cooperation from the five statewide pension systems.

Days 31–90: Examine the STRS performance and bonus controversy, GGA’s work, existing private equity fee reports, Apollo investment records, and available data center and cryptocurrency exposure information.

Days 91–180: Publish an independent report identifying documented findings, disputed claims, unavailable records, potential conflicts, and recommended statutory changes.

The commission should make its methodology public.

Every significant finding should identify the evidence supporting it.

Pension managers and officials should have an opportunity to respond.

And the commission should not allow another layer of expensive consultants to substitute for independent verification.

Ramaswamy Is Out. The Wall Street Pension Machine Is Still There.

Ohio voters have changed the governor.

They have not automatically changed the pension investment managers, consultants, private equity partnerships, compensation systems or financial relationships that have accumulated over decades.

The STRS bonus controversy remains.

The questions about private-market valuations remain.

The Apollo due diligence questions remain.

The data center and cryptocurrency risks remain.

And the teachers and retirees whose money finances this enormous investment system still deserve more complete information.

I have spent much of 2026 documenting these problems, often finding the same pattern:

Private investment managers collect fees. Consultants validate complicated investment and compensation arrangements. Pension executives receive substantial bonuses. Political networks attract money. And beneficiaries struggle to obtain the information necessary to determine whether the system is working for them.

That pattern is an investigative thesis, not a finding that every institution or individual involved has engaged in misconduct.

But it is more than enough reason for a serious independent inquiry.

Amy Acton has an opportunity to make Ohio a national leader in public pension accountability.

She cannot accomplish every reform by executive order.

She can, however, initiate a credible investigation, mobilize existing oversight authorities, demand explanations and put the evidence before the public.

Ramaswamy lost the election. Now Acton should investigate the pension and Wall Street money machine that will continue operating long after the campaign signs disappear.

Ohio’s teachers, retirees and taxpayers have waited long enough.

---

Christopher B. Tobe, CFA, CAIA is an investment consultant, pension researcher, author of Kentucky Fried Pensions, and co-author with Edward Siedle of a 2025 investigation into CalPERS. His work focuses on fiduciary accountability, public pension governance, investment transparency and private-market investment risks.

By Christopher B. Tobe, CFA, CAIA

Fred Reish and Chris Heye identify a real retirement problem in their Summer 2026 Journal of Pension Benefits article, “The Importance of Annuities for Retired Workers: Why 401(k) Plans Should Include Guaranteed Income.” Retirees need dependable income, and managing investments and withdrawals can become harder with age.

But identifying a problem does not establish that the insurance industry’s preferred solution is the best answer. The article explains the risks of managing retirement savings far more fully than the risks of handing those savings to an insurance company.

Its omissions matter because a product that simplifies monthly cash flow can simultaneously introduce insurer credit risk, opaque pricing, contractual restrictions, and conflicts of interest.

“Guaranteed” by whom?

A general-account annuity replaces some investment and longevity risks with a contractual promise from an insurer. The policyholder owns contractual rights, rather than direct ownership of the insurer’s underlying investment portfolio.

The insurer may hold thousands of investments. That does not mean the retiree has thousands of independently enforceable promises. The retiree’s claim remains against the issuing company.

Other annuity structures can hold assets in separate accounts or diversify guarantees among insurers. Those differences deserve analysis. Treating “annuities” as a single solution conceals precisely the distinctions a fiduciary needs to understand.

The article gives no meaningful examination of what happens if the insurer weakens, what backs the promise, or what protection the participant actually has.

Cognitive decline strengthens the case for safeguards

Reish and Heye devote considerable attention to cognitive decline. Their concern is legitimate. Their policy conclusion is incomplete.

Someone who may struggle to rebalance a portfolio may also struggle to evaluate an annuity contract, compare payout options, recognize a deteriorating insurer, or understand what happens after a rollover.

The answer cannot be merely to educate participants about the advantages of annuities. Education must explain the disadvantages with equal clarity.

A monthly payment can simplify budgeting. It does not prevent a scammer from stealing money after it reaches the retiree’s bank account. Nor does it establish that a complex insurance purchase was suitable in the first place.

If diminished capacity justifies stronger intervention by plan fiduciaries, it also justifies stronger protections against inappropriate insurance products.

Where is the downgrade clause?

The article recommends commitments that can last for decades without discussing a basic contractual protection: what happens when the insurer no longer meets the financial-strength standard that justified its selection?

If a committee selected an insurer because it was AA-rated, what remedy does the participant have after serious deterioration?

In [Lifetime Income Annuities Need Downgrade Clauses to Work in 401(k)s](https://commonsense401kproject.com/2026/08/12/lifetime-income-annuities-need-downgrade-clauses-to-work-in-401ks/), I argued for enforceable transfer or replacement rights after specified credit deterioration.

That is a proposed protection, not a universal requirement of current law. It would need to be negotiated, priced, and funded. Replacing an already-annuitized payment obligation is more difficult than moving an investment account, and a promise to find a replacement insurer is not enough.

A workable contract must identify the trigger, the replacement mechanism, who bears the cost, and what happens when several insurers weaken together.

Those difficulties are reasons to address the issue before purchase. They are not reasons to omit it.

The costs do not disappear because there is no expense ratio

The article provides no meaningful account of annuity pricing.

Depending on the product, compensation can appear through explicit charges, commissions, embedded spreads, guarantee fees, or the terms of the payout itself. An apparently fee-free contract may still be expensive.

An insurer’s entire investment spread is not pure profit or a mutual-fund-style expense ratio. It also funds insurance risks, capital, administration, and other costs. But that is an argument for explaining the economics, not leaving them invisible.

Fiduciaries should demand competing quotes on comparable terms: the same premium, age, commencement date, survivor protection, refund features, inflation treatment, and credit quality. A payout percentage is not an investment return; it can include repayment of the participant’s own principal.

As I argued in [DOL’s Biggest Blind Spot](https://commonsense401kproject.com/2026/07/20/dols-biggest-blind-spot-404a5-fee-disclosures-ignore-annuities-the-largest-fees-in-many-401k-plans/) and [Annuities Break ERISA’s Disclosure Rules](https://commonsense401kproject.com/2026/06/24/annuities-break-erisas-disclosure-rules/), a disclosure system that leaves material insurance economics obscure makes comparison harder.

The safe-harbor discussion leaves out a crucial statutory requirement

The article describes the SECURE Act insurer-selection safe harbor as obtaining specified insurer information for fiduciary protection, then associates cost review with the separate regulatory safe harbor.

That presentation is materially incomplete.

[ERISA section 404(e)(1)(B)(ii) and (C)(ii)](https://www.law.cornell.edu/uscode/text/29/1104) also require consideration of contract costs, including fees and commissions, and a conclusion that the relative cost is reasonable in relation to the benefits and services. Insurer representations address specified financial-capability considerations; they do not replace the entire selection process.

More fundamentally, protection for a selecting fiduciary does not supply additional capital to the insurer or improve a retiree’s contractual recovery after failure.

A safe harbor for the buyer is not a guarantee for the beneficiary.

Outsourcing selection does not eliminate oversight

The article also points to DOL Advisory Opinion 2025-04A as a way to shift annuity-selection responsibility to an investment manager.

But the [opinion](https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2025-04a) retains the appointing fiduciary’s responsibility to prudently select and monitor that manager, and preserves potential co-fiduciary liability.

The opinion also describes features that deserve more attention: multiple insurers, quarterly competitive bidding, and continuing insurer review. These are representations about the particular program, not DOL factual findings or a blanket endorsement of annuities.

If fiduciary expertise is outsourced, the committee still needs to understand the manager’s incentives, methods, compensation, and conflicts.

Where are the prohibited-transaction questions?

The article does not examine whether an insurer, recordkeeper, adviser, or affiliate is a party in interest, or how compensation moves among them.

An insurer recordkeeper recommending its own annuity presents a different conflict from an independent adviser evaluating competing providers. Proprietary products, affiliated services, commissions, and platform payments deserve scrutiny.

As I argued in [Annuities as Prohibited Transactions in Retirement Plans](https://commonsense401kproject.com/2026/03/01/annuities-as-prohibited-transactions-in-retirement-plans/), fiduciaries need a separate analysis of the transaction and any applicable exemption.

Not every annuity purchase is automatically unlawful. But an insurer-selection safe harbor is not itself a prohibited-transaction exemption. Fiduciaries should identify the exemption they rely on and document compliance with its conditions.

State regulation is part of the product

A decades-long insurance promise cannot be evaluated without examining the system supervising it.

Which legal entity issued the contract? Where is it domiciled? How much risk has been reinsured, to whom, and under which jurisdiction? What affiliated investments, private-credit exposures, or valuation assumptions support the promise?

These are the questions behind my pieces on [who regulates the annuity](https://commonsense401kproject.com/2026/08/10/annuities-who-is-your-regulator-and-does-your-401k-fiduciary-even-know/), [regulatory shopping](https://commonsense401kproject.com/2026/07/21/annuities-cherry-pick-the-weakest-state-regulator/), and [New York versus Iowa](https://commonsense401kproject.com/2026/08/11/new-york-vs-iowa-annuities-where-does-the-extra-spread-come-from/).

A higher quoted benefit does not establish superior value if the difference reflects additional risk or weaker protection. Conversely, domicile alone does not prove a particular insurer is unsafe. The committee needs evidence.

State guaranty-association protection also requires contract-specific analysis. Coverage depends on governing law and eligibility rules; it should never be presented as an unlimited federal backstop.

That is why I support [a federal insurance watchdog](https://commonsense401kproject.com/2026/09/25/congress-finally-asks-whether-america-needs-a-federal-insurance-regulator-the-answer-is-yes/) with authority to examine financial groups, affiliated transactions, reinsurance, capital, and liquidity before retirees lose access to their money.

A regular payment is not necessarily an adequate payment

The article invokes healthcare and long-term-care expenses without adequately examining inflation or emergency liquidity.

At 3% annual inflation, a fixed payment loses approximately 45% of its purchasing power over 20 years. An income check that continues for life can still become inadequate.

An annuity can help pay care bills. It does not, simply by producing income, insure the cost of long-term care. An unexpected large expense may require liquid assets precisely when an annuitized premium is unavailable.

Fiduciaries must also examine survivor benefits, early-death outcomes, portability, and any loss of guarantees when participants change employers or move their accounts.

Compare alternatives before declaring the solution

The article moves too quickly from the need for retirement income to the need for annuities.

Automatic withdrawals, diversified low-cost portfolios, bond or TIPS ladders, and strategies that coordinate withdrawals with Social Security deserve comparison. These alternatives do not all insure against extreme longevity. Annuities do not solve every liquidity, inflation, or credit problem either.

Likewise, diversified synthetic stable value may provide a useful comparison for capital-preservation money, as I discussed in [my stable-value critique](https://commonsense401kproject.com/2026/03/11/stable-value-industry-admits-synthetic-funds-are-safer-and-why-that-makes-general-account-annuities-a-prohibited-transaction/). It is not a substitute for lifetime mortality pooling.

The fiduciary task is to identify the need and compare the available ways to meet it. As I argued in [Lifetime Income: The Gateway Drug for Insurance Products in 401(k) Plans](https://commonsense401kproject.com/2026/06/09/lifetime-income-the-gateway-drug-for-insurance-products-in-401k-plans/), endorsing retirement income should not become automatic approval of the insurance products marketed under that label.

Reish and Heye make a persuasive case that retirees need help. Their article does not establish that the annuity products offered to them provide that help at a reasonable cost, with adequate transparency and enforceable protections.

Before a fiduciary asks an aging participant to trust a lifetime guarantee, the fiduciary should be able to explain who stands behind it, what it costs, what can go wrong, and what the participant can do when the promise weakens.

BlackRock’s new survey of insurers representing more than $24 trillion in assets shows that 76% plan to increase private-market investments. Coming one week after Wharton’s alarming research on private-equity-owned insurers, the findings raise a bigger question: Who is measuring the risks being transferred to America’s annuity holders and pensioners?

Chris Tobe, CFA, CAIA The CommonSense 401k Project | October 27, 2026

BlackRock Just Confirmed What Wharton Warned About

Last week, I wrote about an important new Wharton research paper documenting how private-equity-owned insurance companies were increasing risks through affiliated investments, private credit, and structured securities.

My article from last week, “Wharton Exposes the Private Equity Insurance Risk Machine — And Why the Entire Annuity Industry May Be Forced to Follow,”, warned that traditional insurance companies would face competitive pressure to adopt similar investment strategies.

Now BlackRock has released its 2026 Global Insurance Report, and the results suggest this transformation is already well underway.

BlackRock surveyed 463 senior insurance executives across 31 markets, representing more than $24 trillion in investable insurance assets.

The findings are extraordinary.

BlackRock’s findings	2026 results
Insurers planning to increase private-market allocations	76%
Insurers already investing at least 5% in private markets	92%
Insurers investing more than 15% in private markets	Over 40%
Insurers prioritizing increased private-debt allocations	41%
Insurers using internal and external asset management	84%
Insurers planning greater use of external asset managers	49%
Insurers reporting external partnerships across two or more business functions	82%

Source: BlackRock, 2026 Global Insurance Survey, released October 27, 2026.

These are survey responses, not independently verified portfolio-level risk measurements. They do not establish that 76% of insurers are taking imprudent risks.

But they show that private markets have moved from a specialized investment strategy to a mainstream component of insurance balance sheets.

Private equity no longer needs to own an insurance company to influence how that insurer invests its policyholders’ money.

That should concern everyone depending on fixed annuities, pension risk transfer annuities, or other long-term insurance guarantees.

The Most Disturbing Finding: 76% Want More Private Markets, but 82% Say They Are Not Increasing Risk

BlackRock reports that 82% of insurers plan to maintain their overall investment-risk profile.

At the same time, 76% plan to increase their private-market allocations.

How can both be true?

There are legitimate explanations. An insurer might reduce other exposures, diversify its investments, or purchase private assets with genuinely strong credit protection.

But the apparent contradiction also exposes a major problem with insurance risk measurement.

Private credit can appear less volatile than publicly traded bonds because it is not priced continuously in an active market.

A publicly traded corporate bond may decline sharply in market value when credit spreads widen.

A privately originated loan may continue to appear on an insurer’s books at or near its adjusted carrying value, even when selling it would require a substantial discount.

The absence of a daily market price does not eliminate the economic loss.

It may simply delay its recognition.

When you stop measuring market volatility, you have not eliminated risk. You may have eliminated the evidence of risk.

That is especially dangerous when insurers use historical volatility, accounting valuations, or favorable private ratings to justify increased allocations to illiquid investments.

The BlackRock survey does not prove that insurers are understating risk. But it makes independent verification more important.

Wharton Found the Hidden Risk. BlackRock Shows How Broadly Private Markets Have Spread.

The two studies should be read together.

The September 2026 Wharton paper, Buying from the Family: Private Equity-Owned Insurers and Their Affiliated Investments, by Amy W. Huber, Stefan Huber, Bella Shan, and Christina Zhu, examined how private-equity-owned insurers invest in securities issued by affiliated businesses.

The researchers found that PE-owned insurers were more likely to purchase affiliated structured securities, sometimes paid higher prices for them, and were less inclined to recognize impairment or sell deteriorating affiliated investments.

Their analysis of NAIC stress-test results was especially alarming.

Under a severe scenario broadly comparable to the 2008 financial crisis, the researchers estimated that affiliated structured-credit exposure could generate approximately four additional percentage points of losses across PE-owned insurers’ fixed-income portfolios.

That compares with an average equity buffer of 7.6% of fixed-income investments.

In other words, the additional modeled losses alone could consume more than half that measured buffer.

The calculation involves extrapolating stress-test results from broadly syndicated CLOs to other structured securities, so it is an estimate rather than a prediction of insurer insolvency.

Nevertheless, it demonstrates why the apparent stability of private-credit investments during normal conditions may be misleading.

BlackRock now supplies the broader industry context.

Its survey shows that private markets are no longer confined to insurers controlled by private-equity firms.

Traditional insurers increasingly invest through external asset managers, separate accounts, and customized mandates.

The risk identified by Wharton is not necessarily identical across these arrangements. An independent insurer hiring a private-credit manager does not automatically have the same conflicts as an insurer buying securities from an affiliated issuer.

But the expansion raises common questions about valuation, liquidity, capital requirements, and who ultimately controls investment decisions.

Wharton documented a specific mechanism of risk. BlackRock demonstrates the enormous scale of the industry’s movement into private assets.

Together, they make a compelling case for federal scrutiny.

The Insurance Industry Is Becoming a Private-Credit Financing Machine

BlackRock reports that 84% of surveyed insurers use a hybrid investment-management model, combining internal capabilities with outside managers.

Nearly half expect to increase their reliance on external asset management.

Even more revealing, 82% report external partnerships covering at least two business functions, including investments, capital, liability and product design, or distribution.

BlackRock describes this evolution as a more modular insurance industry.

That sounds efficient.

But from a regulatory perspective, it raises an important question:

When an insurer depends on a network of outside asset managers, reinsurers, investment originators, and affiliated financial entities, who is responsible for evaluating the risks of the entire arrangement?

Consider a hypothetical insurer that purchases private-credit securities originated by an outside asset manager.

The securities are privately rated.

The underlying loans are held through investment vehicles.

The insurer reports the investments at statutory carrying values.

The asset manager earns fees for originating and managing the loans.

The insurer receives the yield, assumes the investment risk, and promises to pay annuity holders for decades.

This arrangement may be perfectly legitimate.

But it can also create conflicts when the asset manager benefits from placing loans with an insurer regardless of whether those loans represent the best available investments for policyholders.

The potential conflicts become more serious when ownership, financing, reinsurance, or other business relationships connect the participants.

Wharton’s findings show why affiliated transactions deserve special scrutiny.

BlackRock’s findings show why regulators also need to examine the increasingly complex relationships between nominally independent insurers and their investment partners.

A 15-Year Private Mortgage Does Not Become Safe Because Its Interest Rate Resets Every Three Months

One of the biggest weaknesses in insurance asset/liability analysis is the distinction between interest-rate duration and actual liquidity.

Consider a private commercial mortgage with a 15-year maturity and an interest rate that resets quarterly.

Its sensitivity to changes in benchmark interest rates may be relatively low.

But its principal remains exposed to the borrower for 15 years unless it is prepaid or refinanced.

If commercial real estate values decline, the borrower encounters financial difficulty, or refinancing becomes unavailable, the insurer may face a substantial loss.

And if the insurer needs cash immediately, selling the mortgage may require a large discount.

A three-month rate reset does not produce a three-month investment.

It does not guarantee repayment of principal.

It does not guarantee market liquidity.

It does not eliminate credit-spread risk.

Yet insurers can present portfolios with relatively short interest-rate duration and favorable credit ratings without providing enough information about the underlying contractual maturities and stressed liquidation values.

This is especially important for general-account fixed annuities.

A retirement plan may hold an institutional fixed annuity for 20 or 30 years without a fixed contractual maturity date.

The insurer may model the expected liability duration at a substantially shorter period based on participant withdrawals and expected plan behavior.

Meanwhile, the supporting assets may include privately originated loans with contractual maturities extending well beyond their apparent interest-rate duration.

The question is not simply whether the insurer’s reported asset duration matches its modeled liability duration.

The question is whether the insurer can produce cash when it needs to pay policyholders during a severe credit crisis.

That requires an entirely different level of disclosure.

BlackRock’s Own Business Interests Deserve Scrutiny

BlackRock is not a neutral academic observer.

It is one of the world’s largest asset managers and an increasingly important participant in private markets, including through its acquisition of HPS Investment Partners.

It has a commercial interest in providing investment-management services to insurance companies.

That does not invalidate its survey. The findings are valuable precisely because they reflect what insurance executives say they intend to do.

But it should affect how regulators interpret the industry’s enthusiasm for private markets.

Asset managers benefit when insurers allocate more capital to investment products and mandates they manage.

Insurers may benefit from higher expected yields.

Insurance executives may benefit from improved reported profitability and competitiveness.

The annuity holder, however, does not necessarily receive a proportional share of those benefits.

In a traditional general-account fixed annuity, the insurer typically retains the difference between its investment earnings and the crediting rate promised to policyholders, after expenses and other costs.

When investment yields increase, the insurer may retain some or much of the additional spread.

But if those higher yields reflect greater credit, liquidity, or valuation risk, policyholders remain exposed to the insurer’s ability to honor its guarantees.

This creates an obvious question:

Are insurance companies increasing private-credit exposure to improve retirement security, or to increase the investment spread retained by insurers and their financial partners?

That question deserves far more scrutiny than it receives.

The Race to the Bottom May Already Be Underway

My Wharton based article argued that private-equity-owned insurers could create competitive pressure on traditional insurance companies.

The logic is straightforward.

If one insurer can offer attractive annuity rates or lower pension risk transfer premiums because it invests in higher-yielding private credit, competing insurers may face pressure to increase their own portfolio yields.

They can accept lower profits, lose business, or pursue similar investments.

BlackRock’s survey suggests that private-market investing is now widely embedded in insurers’ strategies.

It does not prove that competition has forced every insurer to take more risk.

But it supports the concern that the industry is moving in a common direction, even while individual insurers differ in their investment policies.

This matters enormously for pension risk transfers.

A pension sponsor shopping for an annuity may prefer the insurer offering the lowest premium.

A lower premium can leave more assets available for the sponsor or reduce the cost of terminating the pension obligation.

But if the lower price is made possible by assuming greater private-credit risk, pensioners may bear consequences that are not reflected in the initial transaction price.

Under a pension risk transfer, retirees typically lose the protection of the PBGC for transferred benefits and instead depend on the insurer’s contractual promise and applicable state guaranty protections.

That makes the insurer’s investment portfolio a critical component of retirement security.

A fiduciary cannot adequately evaluate that promise merely by reviewing a financial-strength rating.

The insurer’s private-credit concentration, asset-manager relationships, liquidity, and stress-test results are equally relevant.

Remember AIG: Ratings Do Not Prevent Liquidity Crises

The insurance industry has been here before.

AIG held an AAA credit rating in early 2005.

By September 2008, following successive downgrades, it was rated A− and required an emergency $85 billion Federal Reserve rescue.

AIG’s problems included mortgage-related securities, derivatives collateral requirements, securities lending, and the inability to raise cash when confidence disappeared.

The crisis did not require every regulated insurance subsidiary to become legally insolvent.

Liquidity demands at the broader financial group became overwhelming before a formal bankruptcy.

The comparison with today’s private-credit insurers is not exact.

AIG’s derivatives and securities-lending exposures differed from the private-credit investments highlighted by Wharton and BlackRock.

But the underlying lesson remains important.

A highly rated financial institution can become a systemic threat when deteriorating assets, leverage, credit downgrades, and liquidity demands reinforce one another.

BlackRock reports that 61% of surveyed insurers expect a soft landing for the global economy over the next year.

Only 18% identify recession as a leading macroeconomic concern, down from 35% in 2025.

That optimism may prove justified.

But retirement security should not depend on the majority of insurance executives correctly forecasting the next recession.

The entire purpose of capital requirements and insurance regulation is to ensure that promises survive when optimistic assumptions prove wrong.

Why Fixed Annuities Need Downgrade Clauses

In my article “Annuity Derisking in Retirement Plans,”, I argued that retirement plans should demand stronger protections against insurer credit deterioration.

A general-account fixed annuity exposes participants to the financial strength of one insurer.

The insurer may own thousands of investments, but the participant generally owns a contractual claim against that insurer rather than a diversified interest in the underlying assets.

One protection is an enforceable downgrade clause permitting the retirement plan to exit at book value if the insurer’s financial strength deteriorates.

Insurers may resist such provisions because they create liquidity obligations at precisely the time the insurer could be under financial stress.

That resistance demonstrates why the provisions can be valuable.

But downgrade clauses must be supported by appropriate capital and liquidity requirements. A contractual promise is only useful if the insurer can honor it.

For PRT annuities, comparable protection could involve additional collateral, security arrangements, or replacement-insurer mechanisms rather than simply allowing pensioners to surrender lifetime benefits.

Congress should require fiduciaries to evaluate these protections through competitive bidding and require insurers to disclose their cost.

The value of protection should not be ignored merely because insurers prefer contracts without it.

The NAIC Cannot Regulate This Problem Adequately by Itself

The United States continues to rely primarily on state insurance regulation, coordinated through the National Association of Insurance Commissioners.

The NAIC develops important model laws, valuation rules, and risk-based capital standards.

But it is not a federal regulator with direct nationwide enforcement authority over every insurance company and financial conglomerate.

Meanwhile, the investments supporting American annuities can pass through asset managers, reinsurers, offshore entities, and privately structured investment vehicles operating across multiple jurisdictions.

The financial risks are national and increasingly global.

The regulatory system remains fragmented.

In my September 25 article, “Congress Finally Asks Whether America Needs a Federal Insurance Regulator? The Answer Is Yes,”, I argued that the United States needs meaningful federal insurance oversight.

BlackRock’s survey makes that argument more urgent.

If insurers representing trillions of dollars are increasingly dependent on private markets and external financial partners, regulators need the authority to examine those relationships across the entire corporate structure.

They need to know who originated the investments, who rated them, who values them, who receives the fees, where the assets are legally held, and what happens when the insurer needs cash.

And they need to be able to intervene before a financial crisis exposes risks that statutory accounting failed to reveal.

Congress Should Require Seven Reforms

1. Full disclosure of private-credit investments. Insurers should report private-credit exposures by asset class, contractual maturity, interest-rate duration, credit-spread sensitivity, valuation methodology, rating provider, and liquidity.

2. Independent valuation and rating scrutiny. Privately rated securities and affiliated investments should face independent review, particularly when their favorable ratings reduce statutory capital requirements.

3. Federal insurance liquidity stress tests. Regulators should test simultaneous private-credit defaults, declining recovery rates, credit-spread widening, downgrades, and forced asset sales. The tests should examine both capital adequacy and actual cash availability.

4. Transparency across affiliated and external investment managers. Insurers should disclose ownership relationships, investment-management fees, affiliated transactions, reinsurance arrangements, and material conflicts of interest.

5. Offshore investment transparency. Federal reporting should trace retirement assets through Bermuda, Cayman, Luxembourg, Delaware, and other investment structures to their ultimate economic exposures.

6. Stronger retirement-annuity protections. ERISA fiduciaries should obtain meaningful information about insurer credit and liquidity risk, and evaluate downgrade provisions or equivalent security protections before committing participant benefits to an insurer.

7. A federal insurance regulator with real authority. Congress should establish a federal agency capable of supervising systemic insurance risks, requiring standardized disclosures, examining financial groups, and enforcing capital and liquidity standards across state and international boundaries.

These reforms would not prohibit prudent private-credit investing.

They would require insurers to demonstrate that their assets, capital, and liquidity are adequate to support the promises they have made.

That should not be controversial.

The BlackRock Warning Is Bigger Than BlackRock Intended

BlackRock presents its survey as evidence that private markets have become a mature and strategic component of insurance investment portfolios.

That may be how the asset-management industry sees it.

I see something more troubling.

Wharton has documented how affiliated private-credit investing can weaken investment discipline and magnify losses under severe stress.

BlackRock now confirms that private-market exposure is widespread and that insurers are increasingly relying on external financial partners to manage their assets and businesses.

Together, these findings suggest that the risks associated with private credit can no longer be treated as a specialized problem involving a few private-equity-owned insurance companies.

The issue is potentially much larger.

The entire insurance industry is becoming more connected to private-credit markets, asset managers, and complex financial structures.

And the people who ultimately depend on insurance promises—retirees, pensioners, and annuity holders—may have little understanding of those risks.

The industry’s response will be that the investments are diversified, investment grade, professionally managed, and appropriately capitalized.

Those assurances are not enough.

A privately rated AA security is not the same as cash.

A floating-rate 15-year mortgage is not a short-term liquid investment.

An investment carried at book value is not necessarily worth that amount in a distressed sale.

And an insurance company with adequate reported statutory capital is not necessarily prepared for simultaneous credit losses and liquidity demands.

BlackRock reports that 74% of respondents plan to access private debt through separate accounts or bespoke mandates. That reinforces the need for asset-level transparency and scrutiny of insurer–asset-manager relationships, even when the insurer is not PE-owned.

BlackRock has confirmed the scale of the industry’s private-market expansion. Wharton has demonstrated some of the hidden dangers. AIG demonstrated what can happen when financial risks and liquidity demands overwhelm even a highly rated institution.

Congress should connect the dots.

America needs federal insurance regulation before the next private-credit crisis—not another taxpayer rescue afterward.

---

Research and related reading

• BlackRock, 2026 Global Insurance Report, October 27, 2026.
• Financial Times, “Insurers bullish on private markets even as government bond yields rise”, October 27, 2026.
• CommonSense 401k Project, “Wharton Exposes the Private Equity Insurance Risk Machine”, October 20, 2026.
• CommonSense 401k Project, “Offshore in Your 401(k): Congress Must Require Wall Street to Show the Entire Chain”, October 15, 2026.
• CommonSense 401k Project, “Congress Finally Asks Whether America Needs a Federal Insurance Regulator”, September 25, 2026.

By Christopher B. Tobe

My wife and I are parents of an autistic daughter. Medicaid waiver services are an essential part of how we meet her needs and plan for her future.

When Washington debates Medicaid, we hear something more concrete than competing budget numbers. We hear questions about whether families can find caregivers, whether community services will remain available, and whether adults who need substantial support will have somewhere safe to live when their parents can no longer care for them.

Kentucky’s Senate candidates, Andy Barr and Charles Booker, should be judged on how their policies answer those questions.

The record shows a clear difference. On July 3, 2025, Barr voted for final House passage of the One Big Beautiful Bill Act, which President Trump signed the following day. Booker’s campaign explicitly calls for reversing the law’s Medicaid cuts. One candidate helped enact the changes; the other promises to reverse them.

Voters deserve to understand what that difference means.

KFF reports that the Congressional Budget Office estimated the legislation would reduce federal Medicaid spending by approximately $911 billion over 2025–2034 compared with the previous legal baseline. This is a substantial withdrawal of federal support relative to what otherwise would have been provided.

Barr has defended the legislation as protecting Medicaid against fraud, waste, and abuse. He has also argued that Medicaid spending will continue growing over the next decade.

Spending can rise in dollars while falling substantially below the amount projected under prior law. Population needs, medical costs, and caregiver wages do not stop increasing because Congress changes a funding formula. A growing national spending total does not establish that Kentucky will have sufficient resources to sustain access to care.

The relevant question is whether people can actually obtain the services they need.

That matters especially for home and community-based services. Most of these services are optional under federal Medicaid law, and states can limit waiver enrollment and spending. KFF warns that federal funding reductions could lead states to serve fewer people, reduce benefits, or lower provider payments.

“Optional” is a budget classification. For a family depending on personal care, respite, behavioral support, or residential assistance, these services can be indispensable.

Nor does an exemption from work requirements settle the issue. Kentucky says the requirements beginning January 1, 2027, apply principally to Medicaid expansion adults, with exemptions including people with disabilities and qualifying caregivers. Those protections matter. They do not guarantee adequate funding for waiver services or an available caregiver.

Kentucky has already demonstrated how fragile this system can be. In July, Governor Andy Beshear announced that unexpected revenue would prevent a planned 4% Medicaid provider fee schedule reduction and address underfunding of existing Michelle P. waiver slots. That was a separate state budget dispute, and it should be described accurately. It also showed that maintaining services requires actual money and deliberate policy choices.

Booker’s commitment to reverse the federal Medicaid cuts addresses that funding problem more directly than assurances that the program remains protected.

Kentucky’s next senator must also recognize the connection between family caregiving and the broader economy. When reliable support disappears, someone must fill the gap. Often that means a parent reducing work, leaving employment, or postponing retirement. The need remains even when public funding retreats.

For my family, planning for our daughter’s future requires services we can depend on over many years. Kentucky deserves a senator prepared to make that same long-term commitment—and willing to be held accountable for delivering it.    Charles Booker is that Senator.

Massie deserves credit for challenging his own party’s leadership and helping force disclosure of the Epstein files. His defeat should never become permission for Washington to abandon the investigation or protect powerful people from scrutiny.

Melissa Strange has made her position explicit. Her campaign platform calls for releasing the Epstein files and prosecuting perpetrators. She also supports restrictions on congressional stock trading, a ban on members becoming lobbyists, and campaign finance reform. These are public commitments voters can use to hold her accountable.

Her Republican opponent, Ed Gallrein, benefited from an outside spending operation that has strong connections to Jeffrey Epstein and Israel.

In the primary Gallrein received from  Paul Singer via MAGA KY $3 million.   Singer is a major pro-Israel financier who helped fund the operation against Massie, and he is mentioned in Epstein records.  His oil company CITGO was a major beneficiary of the Venezuela operation.

Miriam Adelson a joint citizen of US and Israel gave $750,000 to MAGA KY.   Both Miriam and her late husband Sheldon Adelson are mentioned in Epstein-related materials.

Hedge Funder John Paulson was a major $410,000 Gallrein doner in primary.   Massie publicly challenged Paulson’s appearance in Epstein’s address book, and subsequently released records that show Epstein emailed Paulson about a $50,000 donation to a dinner honoring Howard Lutnick.

Trump Secretary of Commerce Howard Lutnick contributed approximately $8.75 million to MAGA Inc. during the 2024 cycle. ABC News subsequently reported his acknowledgment of a 2012 visit to Epstein’s island, years after the point at which he had previously said he would never again be in Epstein’s presence.

Ronald Lauder gave MAGA Inc. $5 million, according to Forbes’ review of federal filings. Bloomberg reported that Epstein coordinated a legal entity allowing Lauder and Apollo co-founder Leon Black to share ownership of a $25 million painting. That was a specific financial arrangement involving Epstein.

Schwarzman, Blackstone’s co-founder, contributed $400,000 appears in the Epstein records.

The survivors deserve an accounting of who enabled Epstein, how institutions failed them, and why accountability took so long. Kentuckians deserve a representative prepared to demand those answers even when influential people would prefer silence.

Melissa Strange has committed herself to Epstein disclosure and accountability. On that basis, she has my endorsement for Congress.

Chris Tobe is the Chair of Kentucky Epstein Justice

By Chris Tobe | The CommonSense 401k Project

Ohio needs an attorney general willing to investigate the financial establishment that has grown comfortable operating behind pension secrecy, political connections and public subsidies. That is why I support John Kulewicz over Keith Faber.

Kulewicz offers an opportunity to change direction. Faber’s record as auditor gives me little confidence that he would deliver the independent scrutiny Ohio teachers, retirees and taxpayers deserve.   Faber has taken large amounts of money from Epstein and data center-related donors.

The next attorney general should bring transparency to three overlapping subjects: public-pension investments, financial relationships involving Jeffrey Epstein’s wealthy associates, and the money behind Ohio’s data-center boom. Each involves powerful interests. Each requires someone willing to follow public money wherever the records lead.   The AG plays a major role as Ohio STRS legal advisor.

Faber’s STRS audit was a whitewash in its practical effect

In December 2022, Faber announced that his special audit of the State Teachers Retirement System of Ohio found no evidence of fraud, illegal acts or data manipulation within its limited review. His office broadly reassured the public about the system’s controls and oversight.

I regard that as a whitewash in its practical effect: reassurance for the institution, insufficient accountability for the people paying its bills.

Faber did vaguely discuss investment fees, benchmarks, bonuses and secrecy. He weakly suggested reconsidering bonus arrangements and removing trade-secret protections. He did no real analysis that would lead to any real accountability or transparency a victory for the Epstein class.

Teachers needed a clear accounting of every layer of investment expense, a rigorous test of compensation against independently measured performance, and public access to the contracts governing their retirement money. They deserved more than recommendations that other officials debate whether the system should improve.

The scale is visible even in STRS’s own financial reporting. For fiscal 2023, STRS reported approximately $256 million in external asset-management fees, including approximately $181 million for alternative investments. Its notes explain that carried interest and certain other fund expenses appear within investment appreciation rather than that management-fee total. The headline fee number therefore does not tell the whole cost story.   Faber helped enable and hide hundreds of other $millions in fees to Epstein-linked firms like Apollo and others.

An aggressive watchdog would make that distinction understandable to every teacher.

Yost pursued the reformers. Who investigates the establishment?

Under Republican Attorney General Dave Yost, Ohio pursued the removal of transparency advocates Wade Steen and Rudy Fichtenbaum over their dealings with a non-existent firm QED who receive $0 while ignoring hundreds of millions of hidden investment fees in secret no-bid contracts to Epstein linked firms like Apollo.  

The corrupt AG Yost backed by corrupt Auditor Faber focused on a $0 issue while looking  the other way at millions in excessive bonuses and hundred in excessive fees to Epstein class Wall Street firms.

Pension staff Compensation

Faber whitewashed the excessive compensation for public employees at the Ohio State Teachers Retirement Systems. 

4 employees earned over $600,000.

20 employees earned over $400,000.

49 employees earned over $300,000.

85 employees earned over $200,000

STRSsalaries2024.csv

By comparison, the average Ohio teacher earns $68,000, with many retirees living on less than $45,000 per year — without a COLA.

A researcher from the conservative Heritage Foundation even found this excessive.

Epstein scrutiny must extend to pension relationships

Ohio’s Epstein discussion cannot stop with Les Wexner. Signal reported that Les Wexner directly gave Faber $15,000 in 2025.

Faber has received money from major Epstein banker JP Morgan.  

My reporting has repeatedly raised questions about Apollo, its former leader Leon Black and Ohio public-pension business. 

The Republican Attorney General’s Association RAGA is actively supporting Faber hrough Safer Ohio Fund, and its funding includes major banks and and a number of  Apollo-controlled business (U.of Phoenix, ADT).

Data centers need a public-money investigation

Ohio’s data-center boom demands equally serious scrutiny. Tax exemptions, local abatements, infrastructure commitments, water arrangements and electricity costs all deserve public accounting.  https://commonsense401kproject.com/2026/08/23/ohio-should-already-have-a-data-center-watchdog-but-auditor-keith-faber-is-being-a-lapdog/

RAGA is actively supporting Faber through Safer Ohio Fund and they are well funded by Data Centers in the Millions.

Contributor	Combined receipts	Relationship to the issue
Dominion Energy	$1,100,000	Electricity supplier serving major data-center territory
Amazon.com Services	$305,000	Cloud/data-center operator
Google	$300,000	Cloud/data-center operator
Anthropic	$300,000	AI developer and computing customer
OpenAI	$225,000	AI developer and computing customer
Meta Platforms	$200,000	Data-center operator
Microsoft	$50,000	Cloud/data-center operator
Oracle	$50,000	Cloud/data-center operator
American Electric Power Service Corp.	$50,000	Electric utility
Vistra Corporate Services	$50,000	Power producer
Duke Energy	$25,000	Electric utility
Selected total	$2,655,000

The Center for Media and Democracy’s July investigation identified $250,000 each from Google, Anthropic and Dominion in the second quarter of 2026.

My August call for a data-center watchdog asked for something basic: identify the owners, disclose the public assistance, compare promises with results and determine who bears the risk.

Public pensions may also invest through managers active in digital infrastructure. That overlap requires a look through the investment structures; it does not prove that a particular pension dollar financed a particular Ohio facility.

The next attorney general should coordinate lawful investigations with auditors and regulators, scrutinize conflicts and misrepresentations, and pursue recovery where the evidence and law support it. Ohio also needs a searchable public record of these deals and legislation closing unjustified disclosure gaps.

Support Kulewicz—and demand a reform agenda

Kulewicz explicitly campaigns on confronting corrupt politicians and restoring transparency and accountability. His decades of litigation experience give him a credible foundation for that work.

I am endorsing him as the better opportunity for change, while asking him to make that promise concrete: independent pension-performance review; full investment-cost disclosure; scrutiny of compensation and consultant conflicts; examination of Epstein-linked financial relationships; and coordinated accountability for publicly supported data-center deals.

Ohio has had enough institutional reassurance. Teachers and taxpayers deserve answers about who receives their money, who benefits from secrecy and who is responsible when the public gets a bad deal.

John Kulewicz should be Ohio’s next attorney general. Then Ohioans should hold him to the standard Faber has failed to meet: follow the money, open the records and serve the public—even when the questions make powerful people uncomfortable.

Sources and related reporting

• Faber’s December 2022 STRS audit announcement
• STRS financial statements and fee disclosures, fiscal 2023
• Kulewicz’s campaign platform
• Faber’s SFOF membership announcement, May 26, 2026
• Watchdog’s May 14, 2026 request concerning Metcalf
• Watchdog’s 2024 SEC investigation request
• Court ruling on STRS trustees, February 2026
• Ohio’s Epstein election: pensions and data centers
• Ohio should already have a data-center watchdog
• STRS, Metcalf and SFOF
• Epstein, Apollo and Ohio teachers’ billions
• STRS performance numbers and bonuses
• STRS’s response to performance questions
• The pension compensation consultant

A major new Wharton study documents how private-equity-owned insurers favor affiliated investments, pay higher prices, delay recognizing losses, and expose policyholders to greater risks. The danger does not stop with private equity. Traditional insurers must compete with this model, potentially pushing the entire industry toward riskier investments. Congress needs a federal insurance regulator before the next insurance crisis.

By Christopher B. Tobe, CFA, CAIA
The CommonSense 401k Project | October 2026

Wharton Has Done What Insurance Regulators Should Have Done Years Ago

A remarkable new 2026 paper from the Wharton School at the University of Pennsylvania provides some of the strongest empirical evidence yet that private-equity ownership is changing the risks borne by American annuity holders.

The paper, “Buying from the Family: Private Equity-Owned Insurers and Their Affiliated Investments,” by Amy W. Huber, Stefan Huber, Bella Shan, and Christina Zhu, examines what happens when the same financial conglomerate controls both an insurance company and the businesses originating the investments that insurer purchases.

The findings should alarm retirement-plan fiduciaries, pensioners, insurance regulators, and members of Congress.

The researchers used detailed statutory insurance filings, security-level transaction records, ownership structures, independent valuations, and NAIC stress tests. They did not merely speculate about conflicts of interest. They examined how affiliated transactions actually differ from arm’s-length investments.

Their findings challenge the comforting insurance-industry narrative that investment-grade ratings, state regulation, and statutory reserves adequately protect annuity holders.

The evidence suggests something much more troubling: insurance companies can become captive financing vehicles for the investment businesses of their owners, while policyholders bear the consequences.

And there is an even bigger problem that deserves attention.

Once private-equity-owned insurers gain a competitive advantage from investing in higher-yielding, less-transparent private assets, what happens to traditional insurers that must compete against them?

They face pressure to follow.

That is how a problem concentrated in private-equity-owned insurance companies can become an industry-wide threat.

The Wharton Findings: Follow the Policyholders’ Money

The numbers are extraordinary.

<text></text>

Wharton finding	Result
Assets of directly PE-owned insurers in 2024	$696 billion
Share of new PE-owned insurer investments going into structured securities	Over 40%
Share of those structured-security acquisitions issued by affiliates in 2024	Over 60%
Price premium on affiliated private securities in estimated primary-market transactions	47 basis points
Additional modeled capital loss in a 2008-like stress scenario	Approximately 4 percentage points
Average equity buffer relative to fixed-income portfolios	7.6%

Source: Huber, Huber, Shan and Zhu, September 2026, pp. 1–5, 20 and 27–28.

The authors find that directly PE-owned insurers allocate approximately twice as much of their new investment capital to structured securities as independent insurers.

More importantly, the majority of those structured-security purchases are issued by companies affiliated with the same private-equity owner.

This is not simply an insurer purchasing a diversified collection of independently originated investments.

It is a financial organization originating investments and then using an insurance company under common ownership to help finance them.

The traditional discipline of independent buyers negotiating prices, rejecting unattractive investments, and selling deteriorating assets can be weakened when the buyer and seller ultimately answer to the same financial conglomerate.

Wharton finds affiliated insurers pay more for the same investments

One of the study’s most revealing findings concerns pricing.

When comparing purchases of the same security on the same day, the researchers find that PE-owned insurers pay higher prices when buying from affiliated issuers.

For privately placed securities classified as primary-market transactions, the estimated premium is approximately 47 basis points of par value.

That is an especially powerful finding because the comparison controls for the security and transaction date.

The higher price benefits the affiliated issuer receiving financing.

But who bears the economic cost of the insurer paying more?

The insurance company does, and ultimately its financial strength supports the promises made to policyholders.

Wharton finds insurers are less willing to recognize deterioration in affiliated investments

The second finding is potentially even more troubling.

When affiliated investments fall below their historical cost, PE-owned insurers are less likely to recognize impairments and less inclined to sell those positions than their other investment holdings.

The researchers find that PE ownership offsets approximately 80% of the increased same-year impairment propensity otherwise associated with affiliated holdings.

This raises a basic question.

Is the insurer making investment decisions for policyholders, or is it protecting the financing needs and reported performance of affiliated investment businesses?

This pattern is consistent with affiliated insurers providing financial support when an independent investor might recognize a loss or exit.

And the researchers do not find that this favorable treatment is rewarded with superior investment performance.

Securities attracting greater affiliated PE-owned insurer investment have lower independent fair-value estimates beginning two years after purchase.

The supposed advantages of affiliated investing are not producing better results in the study’s comparisons.

The Most Frightening Number: Four Percentage Points of Additional Capital Loss

Wharton’s stress-test analysis should attract particular attention from insurance regulators.

Using NAIC CLO stress-test results and extending the findings to the broader structured-security portfolios of PE-owned insurers, the researchers estimate approximately four percentage points of additional portfolio losses under a severe financial-crisis scenario.

That compares with an average equity buffer equal to 7.6% of fixed-income investments.

In other words, the estimated additional losses alone could consume more than half that measured equity buffer.

The estimate extrapolates from stress-tested broadly syndicated CLOs to other structured securities whose stress performance cannot be directly observed.

But that limitation actually exposes another regulatory weakness: many of the private securities that deserve the closest examination are precisely those for which independent market prices and comparable stress data are most difficult to obtain.

If regulators cannot reliably measure the risk of the assets, why should policyholders accept assurances that statutory capital is adequate?

The Next Domino: Traditional Insurers May Be Forced to Take More Risk

Here is where I would take the Wharton findings a step further.

The paper concentrates on insurers directly owned by private-equity firms.

But competition does not stop at corporate ownership boundaries.

Imagine two insurers competing for the same $1 billion pension risk transfer.

One insurer benefits from an affiliated private-credit origination business. It can purchase complex, higher-yielding private securities and potentially benefit from favorable regulatory capital treatment.

The second insurer operates more traditionally, relying more heavily on liquid, publicly traded investment-grade bonds.

If the first insurer can generate higher expected portfolio yields, it may be able to offer the pension sponsor a lower premium while still targeting an attractive profit margin.

What does the second insurer do?

It can lose business, accept lower profits, or move toward investments offering higher yields.

This is the competitive contagion that could transform a private-equity insurance problem into an entire insurance-industry problem.

Traditional insurers do not have to be purchased by Apollo, Blackstone, KKR, or another private-equity manager to adopt similar investment strategies.

They can increase allocations to privately originated loans, commercial mortgages, structured credit, asset-backed securities, fund-finance arrangements, and privately rated investments.

They can hire private-credit managers or establish investment partnerships without changing the insurer’s ultimate ownership.

The incentive is straightforward: if higher portfolio yields permit lower PRT bids, more competitive annuity crediting rates, or larger retained investment spreads, competitors will feel pressure to participate.

Not every insurer will respond by taking more risk. Stronger capital standards, conservative management, and independent investment governance can resist that pressure.

But absent meaningful regulatory discipline, competition can reward the companies most willing to stretch their balance sheets.

That is a classic race-to-the-bottom problem.

And unlike ordinary corporate competition, the potential losers include pensioners who may depend on one insurance company’s promise for the rest of their lives.

Private Credit Can Look Short-Term on Paper While Remaining Illiquid for 15 Years

Another major concern is the way insurers measure asset/liability risk.

A privately originated commercial mortgage may have a contractual maturity of 15 years but reset its interest rate every three months.

Because of the floating rate, the asset can exhibit relatively low sensitivity to changes in benchmark interest rates.

But that does not mean the mortgage is liquid.

It does not mean the borrower can repay principal tomorrow.

It does not mean the insurer can sell the mortgage at book value during a financial crisis.

And it certainly does not mean that a private AA rating guarantees the existence of an active secondary market.

A three-month interest-rate reset does not turn a 15-year private mortgage into a three-month investment.

Yet the industry’s emphasis on interest-rate duration, ratings, and book-value accounting can obscure the distinction between interest-rate risk, credit risk, and liquidity risk.

An insurer can appear to have reasonably matched assets and liabilities while holding assets that cannot be converted into cash without substantial discounts.

The risk becomes especially serious when a policyholder, retirement plan, or regulator needs cash precisely because the insurer’s creditworthiness has deteriorated.

The Wharton paper reinforces this concern by finding that PE-owned insurers concentrate affiliated investments in securities that independent investors find more difficult to value.

It also identifies structures such as rated feeder funds and special-purpose vehicles that can transform private-fund exposure into securities receiving favorable regulatory capital treatment.

The question for Congress is simple:

Are regulatory ratings and capital formulas measuring the actual economic risks, or are financial engineers designing investments to satisfy the formulas?

Lincoln Shows Why This Is Not Just a Private Equity Problem

In my September 21 article, “Lincoln Says Its General Account Is ‘High Quality.’ The CDS Market Says Look Closer,”, I examined Lincoln Financial’s promotion of its general-account investment quality.

Lincoln reported approximately 96.8% investment-grade assets, while also disclosing substantial allocations to private credit, structured investments, and mortgages.

I compared Lincoln National’s five-year credit-default-swap spread of approximately 130 basis points in mid-September with Prudential’s approximately 80 basis points.

These are holding-company CDS quotations, not direct measures of the credit risk of the annuity-issuing subsidiaries. Nevertheless, they provide a market-based signal that deserves attention alongside statutory capital and insurer financial-strength ratings.

My criticism was not that Lincoln was insolvent (yet) but that its current ratings were somewhat contradicted by its higher credit default swap rates..

It was that calling an investment portfolio high quality does not adequately disclose the economic risk borne by a retirement plan holding a general-account fixed annuity.

The Wharton findings strengthen that concern.

Insurers should not be able to rely on favorable ratings and regulatory carrying values while withholding the information necessary to evaluate private-credit liquidity, asset maturity, valuation uncertainty, and stressed losses.

And the competitive pressure from PE-owned insurers may encourage even traditional carriers to increase those exposures.

Pension Risk Transfers: One Insurer Replaces a Diversified Pension Plan

The implications for pension risk transfers are particularly serious.

When a traditional defined-benefit pension plan purchases a group annuity to settle pension obligations, retirees move from a federally regulated pension arrangement into an insurance contract.

The transaction can remove PBGC protection and ERISA plan-level fiduciary oversight of the transferred benefits.

The insurer becomes the entity responsible for paying benefits, often for decades.

In my October 5 article, “AT&T’s Athene Pension Transfer: State Street Must Answer, but the Sponsor Gets Out,”, I discussed the fiduciary-accountability questions surrounding pension transfers to insurers.

The Wharton paper adds another reason why those questions matter.

What happens when the insurer receiving pension liabilities is part of a financial conglomerate that also originates and structures the assets purchased with policyholder-backed capital?

What happens when the insurer favors affiliated investments, pays more for them, and is reluctant to recognize deterioration?

And what happens when a traditional insurer competes for the same pension liabilities by increasing its own private-credit allocation?

The danger is not limited to whether the insurer can pay this year’s benefits.

A PRT annuity may require payments for 20, 30, or 40 years.

Fiduciaries should therefore evaluate the insurer’s ability to meet obligations through future credit cycles, not merely its current financial-strength rating.

The Diversification Lie: Thousands of Investments, One Insurance Promise

In “Annuity Derisking in Retirement Plans,”, I argued that retirement plans need to apply ordinary diversification principles to annuity credit risk.

A general-account insurer may own thousands of bonds, mortgages, and private loans.

But a 401(k) participant invested in its fixed annuity generally does not own those investments.

The participant owns a contractual claim dependent on one insurer’s ability to pay.

The insurer may be diversified internally, but the participant remains exposed to a single insurance company.

That is why I favor enforceable downgrade provisions permitting retirement plans to exit at book value when an insurer’s financial strength deteriorates.

A downgrade clause could allow a plan to transfer its money to another financially sound insurer before severe deterioration makes withdrawal difficult.

The absence of such protections can leave participants captive to the very insurer whose creditworthiness has become questionable.

The Wharton findings make these contractual protections more important, not less.

If insurers hold growing concentrations of illiquid private assets, fiduciaries must understand how they will exit when those assets are hardest to sell.

A downgrade clause is not a substitute for adequate capital or regulation. It is an additional protection that should be evaluated, priced, and disclosed.

Weak State Regulation Is Enabling a National Problem

The United States regulates insurance primarily through state governments.

The NAIC coordinates standards, but it is not a national insurance regulator with independent authority to enforce every model rule.

Meanwhile, the largest insurance and asset-management conglomerates operate nationally and internationally.

Their investment structures can involve Delaware insurers, Iowa-regulated entities, Bermuda reinsurers, Cayman Islands investment vehicles, Luxembourg funds, and affiliated asset managers.

In “Offshore in Your 401(k): Congress Must Require Wall Street to Show the Entire Chain,”, I called for disclosures identifying the entities that ultimately control retirement assets, where those entities are domiciled, how they are compensated, and what restrictions apply when investors want their money back.

The same principle should apply to annuity insurers.

If an insurer invests through a Bermuda or Cayman structure, federal regulators should be able to trace the investment to its underlying economic exposure.

If an insurer purchases securities originated by an affiliate, regulators should be able to determine whether the transaction occurred at arm’s length.

If an investment receives an AA rating from a smaller rating agency, regulators should be able to examine the methodology, conflicts, underlying collateral, and actual trading evidence.

And if an insurer transfers liabilities to an offshore reinsurer, federal regulators should be able to evaluate the entire transaction, including the assets and capital supporting the obligations.

Financial conglomerates operate across state and national borders. Regulatory accountability should not stop at those borders.

Congress Has Already Been Warned

In my September 25 article, “Congress Finally Asks Whether America Needs a Federal Insurance Regulator. The Answer Is Yes,”, I discussed the Congressional Research Service’s examination of private investments and insurance companies.

CRS reported approximately $849 billion in private-credit holdings among life insurers in 2024 and identified concerns involving private ratings, affiliated investments, offshore reinsurance, and regulatory arbitrage.

Those numbers are not limited to directly PE-owned insurers.

The Wharton paper now provides additional evidence of why these issues deserve federal attention.

State regulators are supervising companies whose investment decisions can affect national retirement markets and potentially transmit losses into broader credit markets.

The authors explicitly identify the possibility that losses on affiliated investments could force insurers to sell other securities to restore capital, spreading stress beyond the original private-credit investments.

That is systemic risk.

It cannot be adequately addressed merely by reviewing whether each individual insurer satisfied its state’s statutory capital formula at year-end.

The financial system is interconnected. The regulatory response must recognize those connections.

Elizabeth Warren Is Asking Questions Congress Should Have Asked Years Ago

In “Elizabeth Warren May Be the Insurance Industry’s Only Real Watchdog — and a CFPB-Style Federal Regulator Is Its Worst Nightmare,”, I argued that federal lawmakers need to challenge the insurance industry’s longstanding reliance on state supervision.

Senator Warren’s scrutiny of private-equity-linked insurers reflects a larger issue that should concern both political parties.

Americans depend on annuity contracts for retirement security.

Those promises should not depend on whether a small state insurance department has sufficient resources, independence, or expertise to examine a global private-credit conglomerate.

Congress should establish a national insurance regulator with genuine investigative, supervisory, and enforcement authority.

A CFPB-style model would put the interests of policyholders at the center, but the agency would also need powers the current CFPB does not possess: prudential supervision, capital and liquidity examinations, and oversight of insurance holding-company groups.

The goal should not be to replace every state insurance function.

It should be to establish enforceable national protections against risks that state-by-state regulation cannot adequately control.

Seven Federal Reforms Congress Should Enact

1. Require full transparency of private-credit and affiliated investments.

Large insurers should disclose private-credit exposures, affiliated transactions, underlying asset classes, valuation methods, ratings providers, contractual maturities, and liquidity characteristics in standardized, comparable formats.

2. Require independent valuations of affiliated investments.

Affiliated assets should receive independent valuation scrutiny, especially when they are privately placed, difficult to trade, or purchased from related entities. Regulators should compare carrying values with credible market-based exit values.

3. Establish meaningful federal capital standards for private-credit risk.

Regulatory capital should reflect credit risk, concentration, valuation uncertainty, and liquidity. A privately rated AA security should not automatically receive favorable treatment when its underlying risk cannot be independently verified.

4. Require separate disclosure of interest-rate duration, credit-spread duration, and contractual maturity.

Insurers should not be permitted to use short floating-rate reset periods as a substitute for disclosing long-term principal exposure.

A 15-year private mortgage with a quarterly reset should be reported as exactly that.

5. Conduct federal systemic liquidity stress tests.

Regulators should test what happens when multiple insurers simultaneously experience private-credit losses, rating downgrades, reduced new premiums, and demands for cash.

The stress tests should include the possibility that several insurers attempt to sell similar illiquid assets at the same time.

6. Strengthen retirement-annuity protections.

For ERISA fixed annuities and PRT contracts, Congress should require clear disclosure of insurer credit and liquidity risks, meaningful comparisons among insurers, and competitive evaluation of enforceable downgrade protections.

For PRTs, fiduciaries should obtain competitive bids that explicitly price additional credit protections rather than assume such protections are unavailable.

7. Establish a federal insurance regulator with authority over entire financial groups.

A federal watchdog must be able to examine insurers, affiliated asset managers, reinsurers, and investment structures across state and offshore jurisdictions.

It must also have the authority to intervene before liquidity problems become insolvencies.

Disclosure without enforcement is not enough.

The Entire Industry Is Being Pulled Toward Greater Risk

The Wharton authors deserve enormous credit for bringing hard evidence to a debate too often dominated by insurance-company marketing and reassuring credit ratings.

Their research demonstrates that PE-owned insurers systematically behave differently when investing in affiliated securities.

They buy more structured credit, concentrate purchases among affiliates, pay higher prices in certain transactions, and are less inclined to recognize or exit deteriorating affiliated investments.

Their stress analysis indicates that the resulting downside exposure could be substantial relative to insurer capital.

But the greatest long-term danger may be what happens outside private equity.

When some insurers generate higher investment yields by accepting greater private-credit complexity, opacity, and illiquidity, competitors face pressure to do the same.

Traditional insurers may increasingly adopt the same investment strategies even without being acquired by private-equity firms.

The result could be an industry in which higher private-credit exposure becomes the competitive norm.

This is precisely why relying on state regulators, private credit ratings, and year-end statutory accounting is insufficient.

The financial crisis will not wait for regulators to discover that a portfolio with a short reported interest-rate duration contains 15-year loans that cannot be sold.

And retirees should not have to discover that their supposedly safe annuity is backed by investments whose risks were poorly measured, privately rated, or hidden inside affiliated structures.

The Wharton paper should become required reading for Congress, the NAIC, state insurance commissioners, pension fiduciaries, and every retirement consultant recommending annuities.

It provides evidence that the existing system deserves far more scrutiny.

Congress must now confront the broader question: If competition is pushing the entire annuity industry toward increasingly opaque and illiquid private credit, who is protecting the retirees who ultimately bear the risk?

The answer cannot remain 50 state insurance departments acting separately.

America needs federal insurance regulation, transparent private-credit accounting, credible systemic stress testing, and enforceable protections for annuity holders — before the next insurance crisis, not after.

APPENDIX

Remember AIG: A Highly Rated Insurance Giant Needed an $85 Billion Rescue

The Wharton study’s 2008-style stress test should remind Congress of something the insurance industry would prefer to forget: AIG.

In early 2005, AIG held an AAA credit rating from Standard & Poor’s. By September 2008, after successive downgrades, it was rated A− and required an emergency $85 billion Federal Reserve rescue to avert a potentially catastrophic failure.

AIG did not have to be rated junk before its liquidity crisis became overwhelming.

Its problems involved deteriorating mortgage-related securities, derivatives collateral calls, securities lending, and an inability to raise cash when counterparties lost confidence.

On September 15, 2008, rating downgrades generated more than $20 billion of additional collateral and termination-payment requirements over a short period.

The federal government intervened the next day.

Now consider what the Wharton researchers have found about today’s private-equity-owned insurers.

Their analysis of NAIC stress tests shows that additional losses associated with affiliated investments are largely invisible in moderate scenarios but become substantial under financial-crisis conditions.

Their estimated additional portfolio loss of approximately four percentage points would consume more than half the measured equity buffer of the PE-owned insurers in their sample.

And those losses are additional to the baseline stress losses.

The study does not predict another AIG. It documents a potential source of severe downside exposure that deserves much more scrutiny.

AIG demonstrated how rapidly investment losses, ratings downgrades, collateral requirements, and disappearing liquidity can interact.

Wharton demonstrates that today’s affiliated private-credit investments may contain risks that become visible only under severe stress.

Congress should not wait until another highly rated insurance conglomerate needs emergency federal support to discover that state regulation, favorable ratings, and statutory accounting failed to capture the full risk.

The lesson of 2008 is not that every insurer will fail. It is that even a large, highly rated financial institution can become a systemic threat when opaque credit exposures and liquidity obligations interact.

America needs federal insurance stress testing that measures not only investment losses, but also the cash insurers must produce when confidence disappears.

“Do not put all your eggs in the same basket,” or diversification, is one of the most important investment principles.  Many annuities used in retirement plans such as fixed, index, and lifetime annuities in 401k type plans, have single-entity credit and liquidity risk.   Many plans avoid annuities, but for those who do the risk could be mitigated by downgrade clauses or purchasing credit default swaps. 

Harry Markowitz’s landmark 1952 paper, “Portfolio Selection,” established the foundation of modern portfolio theory: portfolio risk depends on how investments move together, as well as the risks of individual holdings. Combining investments with imperfectly correlated returns can reduce portfolio risk. Merely accumulating more securities offers less protection when they share the same underlying vulnerabilities. traders.berkeley.edu

ERISA §404(a)(1)(C) requires fiduciaries to diversify plan investments to minimize the risk of large losses, unless circumstances make foregoing diversification clearly prudent.

For fixed income investors, that principle has a practical application: spread exposure across independent issuers so that one company’s financial trouble cannot devastate the portfolio.

An annuity issued by a single insurer can concentrate participants’ retirement savings in one company’s ability to honor its promises. Executive Life’s failure and AIG’s need for an extraordinary federal rescue demonstrate why an insurance guarantee cannot substitute for evaluating credit and liquidity risk. Insurer distress could expose participants to payment delays, withdrawal restrictions, and/or losses. Plan fiduciaries who fail to prudently evaluate and monitor that concentration, assess exit rights, and document the justification for accepting the risk can increase their exposure to ERISA liability for resulting losses.

A downgrade clause would give a retirement plan a practical way to reduce single-insurer risk when the insurer’s financial strength deteriorates. For example, a plan could require an insurer to meet a specified AA financial-strength rating at purchase, with an enforceable right to withdraw the full contract value—including accrued interest—if its rating falls to A. The plan could then transfer the proceeds to another insurer meeting its AA standard, following appropriate due diligence. The principle is straightforward: participants should not become captive creditors of a weakening insurer because leaving would trigger a financial penalty.   Downgrade clauses are not regularly offered in annuities because they are lest profitable to the insurer.     The difference in costs or yield so annuities with and without downgrade clauses could be used as a way to measure risk related damages.

Credit default swaps offer another potential way to reduce an annuity’s single-insurer credit risk. A $100 million Lincoln fixed-annuity allocation illustrates why single-insurer risk should receive a dollar valuation. Applying the historical 97.8-basis-point Lincoln CDS spread reported for September 2025 produces an annual credit-protection cost equivalent of $978,000—approximately $4.89 million over five years before adjustments. That figure is a starting point for valuing the exposure participants bear. A damages estimate would refine it for the actual annuity issuer and contract, subtract the residual risk of the prudent alternative, and credit any additional compensation participants received. The absence of an insurer failure does not make the exposure economically worthless; it means the analysis must value the contractual risk rather than simply count unpaid benefits.

===================================================

AT&T’s Athene Pension Transfer: State Street Must Answer—But the Sponsor Gets Out

Congress Finally Asks Whether America Needs a Federal Insurance Regulator. The Answer Is Yes.

Lincoln Says Its General Account Is “High Quality.” The CDS Market Says Look Closer

Lifetime Income Annuities Need Downgrade Clauses to Work in 401(k)s

Annuity Risk measured by Credit Default Swaps (CDS)