How private equity firms are widening the income gap in the U.S.
By Terry Gross Fresh Air (NPR) April 26, 2023
GROSS: Can you talk about how investment in private equity firms backfired for teachers in Ohio?
MORGENSON: Yes. There's a great example of a case in Ohio, and this was the state teachers' retirement called STRS, Ohio STRS. And this was a situation very typical for a public pension where it had invested significantly in private equity. And, you know, a lot of public pensions, Terry, don't have employees who are especially sophisticated as far as financial instruments are concerned. And so this was a situation where the fund ended up - and the teachers who were relying on it - ended up paying enormous amounts to the private equity firms that were, you know, investing on their behalf, even as the pensioners themselves had to take a hit on their cost of living increases.
The Ohio teachers' pension fund stopped giving beneficiaries a cost-of-living increase, called a COLA. And so this became an issue. And there were complaints. The teachers went to the meetings. I mean, it was a kind of an interesting battle that raged between the beneficiaries, i.e., the retired teachers who had spent their life, you know, teaching children and assuming that their - at the end of the line, they would have enough money to live - where they ended up paying private equity firms very generous amounts, even as they took a hit to their benefits.
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