Summary: The Illinois Policy Institute’s Marc Levine was appointed to the Board of Trustee of, Illinois Teachers Retirement System (TRS) in April 2017.  TRS manages $44.8 billion on behalf of (non-Chicago) Illinois teachers.  Levine was appointed in January 2015 by Rauner to the Illinois State Board of Investment (ISBI), which manages $15.6 billion on behalf of Illinois State employees and their pensions.  Levine was elected chairman of ISBI a few months later. 

Over the years, Gov. Rauner’s firm, GTCR, has managed millions of dollars for Illinois Teachers Retirement System and the Illinois State Board of Investment. In fact, GTCR  has managed up to $10 billion from PUBLIC pensions nationally – yet the amount GTCR and Gov. Rauner earns from management fees and side deals from public pension funds – including Illinois funds – has never been disclosed. Rauner has, however,  tripled his income since becoming Governor.  Illinois voters don’t even know how GTCR’s investment of Illinois funds are performing. It’s time to ask why. 

Downstate here.

I spy with my Illinois eye.

Who is Marc Levine?

The Governor of Illinois has the power to appoint members to various oversight boards.  This is the story of one such appointment: Marc Levine of the Illinois Policy Institute.

  1. Jan 12, 2015-   Former private equity manager Bruce Rauner was inaugurated as Governor of Illinois.  Rauner’s company, GTCR,  raised a significant portion of its money, perhaps the largest percentage, from public pension fundsThey (public pension funds) supplied half to two-thirds of the firm’s funds, by Mr. Rauner’s estimate.
  2. Jan 30, 2015-   Marc Levine appointed to Illinois State Board of Investment (ISBI).     The Illinois State Board of Investment manages a pile of cash ($15.6 billion) for the pensions of Illinois employees.   It’s a giant honey pot of cash and the Illinois State Board of Investment oversees that money.   Who is Marc Levine?   He was Governor Rauner’s first (of many) appointees from the Illinois Policy Institute.
  3. Sep 17, 2015 –  Marc Levine is elected Chairman of the Illinois State Board of Investment.
  4. Oct 2015-  The Illinois State Board of Investment authorizes the hiring of a consultant to review the portfolio and make recommendations
  5. Jan 29, 2016 – The Board heard the report of the consultant and adopted the recommendations. What were those recommendations?   The Board adopted a change in portfolio policy that more than doubled the amount of money that will be invested in private equity from 4% of the portfolio to 10%.

Why would a more than doubling of the private equity investment on behalf of employees of the General Assembly, judges and state employees be of concern?

Don’t take my word for it.   Take it from people who really know including the Wall Street Journal or someone who made his giant fortune from private equity (and who made $188 Million dollars in income last year),  Bruce Rauner.

Are the glory days of private equity are over?

In March 2015, the venerable Wall Street Journal printed an op-ed called, “The Glory Days of Private Equity are Over,” too many funds chasing too few opportunities, and many of those will be too expensive- it won’t end well.

“Private equity is done. Stick a fork in it. With Kraft singles and Heinz ketchup as toppings, there are many signs that private equity has peaked as an asset class,” WSJ’s Andy Kessler wrote.

Kessler listed a number of reasons including :

  • Interest rates are going up
  • Banks are less eager to lend for leveraged buyouts
  • Tax reform may make it less profitable  (read:  trump to end Rauner’s 32 million dollar tax dodge)
  • Private equity funds are bad for the economy
  • It’s already picked the low-hanging fruit

Rauner “deeply concerned” about the private equity industry

Back in a February 2013 article by Crain’s Chicago Business, Bruce Rauner said he’s “deeply concerned” about the industry in light of private equity’s shrinking returns.

Bruce Rauner said the private equity industry has matured so much that it’s difficult to buy companies, especially large ones, at prices that allow for a significant increase in value.

“As I look at our industry (private equity), I have to say, I’m deeply concerned,” he said. As private-equity firms find it harder to extract returns, they’re turning from their areas of expertise and becoming too short-sighted in order to seek better returns, he said.

There are a number of private-equity firms that are dying and “you can’t kill a private-equity firm with a stick”, he said. When private-equity firms begin winding down their business, it often takes years for them to sell off their assets.

Is the “smart money” unloading their assets on to pension funds?

We hear about the problems with Illinois pensions all the time.

Yes, they’re underfunded.  Yes, they have made promises that are constitutionally protected and are now coming due.   It’s a real conundrum.

But the other part of the formula is about investment returns and buying the right mix of assets that will generate a return for future retirees.

Questions must be asked like: Is the smart money unloading their private equity assets onto ‘dumb’ money pension funds? Why would the Illinois State Board of Investment recommend more than doubling their private equity investment while many other private equity investors are scaling back their investment in private equity?

Real GOP Illinois would like to know if Bruce Rauner is ‘deeply concerned’ about how his appointee Marc Levine of Illinois Policy Institute is managing pension funds for the State of Illinois?   We would also like to know how much GTCR and Rauner are making from Illinois pension fund investments.  The people of the State of Illinois should also be ‘deeply concerned’ since they’re the ones on the hook for the shortfall in returns.

(for review – read What is Private Equity? )