Naked Capitalism is doing a series analyzing private equity, and their first article, which explains how private equity exists solely through a massive infusion of government money:

This is the first in a series of postings on the private equity industry (“PE”) and will serve as an introduction to private equity investing.

Private equity practitioners, including most famously Mitt Romney, often depict their sector as the epitome of private enterprise. These claims are false. Private equity firms not only depend directly and substantially on government support, they have also actively cultivated links to the state.

Some readers may know that private equity relies heavily on tax subsidies. Private equity firms engage in debt-leveraged buyouts of public and private companies, and the interest charges on this debt are tax deductible. But most members of the public do not know that close to half the investment capital in private equity funds is contributed directly by government entities. In this respect, private equity is little different than companies like Fannie, Freddie, and Solyndra that are regularly criticized in the media as recipients of government subsidies.

Their decisions to invest government funds in private equity reflect assumptions by government officials that have gone unchallenged and, we contend, are quite likely incorrect. Moreover, virtually all of the important details of the private equity investments made by these state investors are kept secret at the insistence of PE firms, in striking contrast to every other type of government contract.

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This is not surprising.

Private equity, even when compared to hedge funds, are remarkably opaque, with no prospectus, and little information given to investors.

Even the payoff date is not revealed to investors.

Of course for a public pension manager, they will be gone when it all turns to sh%$.

They’ll probably working for a private equity fund.

If you are investing other people’s money (as in the contributions of state employees) and someone lies to you about possible return on investment, and this would allow your bosses in the governors’ mansions and the state houses to balance the budget, you are inclined to be quite credulous.