Today the Oregon Investment Council (OIC) had its October 2007 monthly meeting and made additional committments to private equity, including $325 million to Oak Hill Partners on top of its original $100 million investment made to a partnership in which Robert Bass and Phil Knight are general partners. State Treasurer Randall Edwards, whose wife Julia Brim Edwards is a public communications director at Nike, was not at the meeting and therefore did not vote.
Pictured below is J Randall of Oakhill Partners making his proposal to Ron Schmidt, PERS Chief Investment Officer on left seated next to legal counsel.
Robert Bass right hand man and managing partner, J. Crandall, made the proposal. Crandall noted that his “first LBO was in 1978 and added that its 39 partners were investing a combined $100 million in the new $4 billion fund. He went on to add that this is not simply “recycling fees” but a real committment on the part of partners. Whatever the case, this amount is a fraction of the fees they are earning.
What makes us unique is our focus on “organic growth,” said Crandall, highlighting they they only leverage up firms they buy 3.5 times while the industry average is 5. As if that were not highly leveraged. He added, and so that’s our “secret sauce.” I almost burst out laughing in that it seems that since I started using this expression, secret sauce, to describe their use of NOL’s, they have turned its meaning around.
In attendance at the meeting was the council’s newest member, Keith Larson. Larson works for Intel Capital and when the council approved $75 million for a technology venture fund, Technology Crossover Partners, it seemed rather odd. Here is a top executive of a publicly traded company, Intel, one of Oregon’s largest, who is now one of five voting members on selecting the managers for Oregon’s $70 billion in PERS assets.
Technology Crossover Partners charges a carry fee of 25 percent in addition to a high annual managment fee, resulting in one council member, Harry Demorest, to initially object yet later support the proposal given the difference between the gross and net returns was about half due to the fees.
Pictured below is Scott Larson of Intel Capital, the newest member of the Oregon Investment Council.
The reason Larson’s involvement seemed strange, including his point that allocating a certain amount to this area is important, is that Intel has a very marginal 401K plan and one would think that deploying Mr. Larson to help fix its own retirement plan, in terms of better choices and lower fees, should be Intel’s priority.
The conflicts of interest given Intel capital’s broad reach with respect to investments that intersect with the council is so significant it is not worth mentioning. With so many capable and more experience candidates to serve in this role, it makes no sense for the Governor to add Larson.
Perhaps this again highlights why the Securities and Exchange Commission should have more oversight regarding directors of public pension systems. At a minimum, Intel’s Chief Financial Officer Andy Bryant should give Larson a call and say this is this is not the appropriate place for Larson to apply his talents.
Pictured below is Dick Solomon, OIC Council Chair and a practicing CPA, whose clients businesses intersect with the OIC’s investments.