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Illustration: Sarah Grillo/Axios

Earlier this month, Ben Meng, chief investment officer of the California Public Employees' Pension System (CalPERS) resigned from the fund after filing incomplete disclosures and failing to comply with conflict-of-interest rules.

What's new: At least one CalPERS board member, Margaret Brown, is publicly calling for a temporarily suspension of any new private equity investments until the conclusion of an investigation into Meng's disclosures. She tells Axios the expected time frame would be 30 to 90 days.

  • No other CalPERS board member or system executive is publicly supporting Brown's suspension proposal.
  • This feels like a mistake. Not because I necessarily think Meng is guilty of much more than sloppiness, but because it's impossible to be sure without the concluded investigation.
  • CalPERS has deep enough pockets that it could ask fund managers to give it an extra couple months to consider limited partner commitments, without causing it to miss out on opportunities.

The backstory: Meng earlier this month left the California Public Employees' Pension System (CalPERS), where he helped oversee over $400 billion in assets under management.

  • It was officially a resignation, but came after financial blogger Susan Weber discovered that Meng had filed incomplete (i.e., false) financial disclosure forms with CalPERS. In other words, his resignation had big "You can't fire me, I quit" vibe.
  • Weber also reported that Meng had personal investments in several private equity firms with which CalPERS does business, without finding evidence that he had recused himself from decisions involving those firms.

Between the lines: These are unforgivable sins for a retirement system fiduciary, although it's a stretch to reasonably argue Meng was trying to line his pockets.

  • CalPERS had decades-long relationships with the private equity firms in question, long predating Meng's arrival.
  • Meng had made efforts to increase CalPERS' private equity exposure, but by expanding into direct investing, not increasing the amount of investment in third-party funds.

The bottom line: CalPERS had been through some massive private equity scandals before, which perhaps is why it's treating this situation like a minor inconvenience. But those past experiences should instead serve as a reminder to board and staff that they often don't know what they don't know.

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