In the last book of his epic Lord of the Rings trilogy, J.R.R. Tolkien immerses the reader in a land of darkness, a province of high risk and shadowy spirits. There, hidden far from the cleansing light of day, nothing is quite as it should be.
Tolkien writes of a fictional universe. In the real world of institutional investors, such a shadowy land exists as well. It is the place of public funds, among the largest investment vehicles in the U.S., with assets in the trillions, built by hard-working teachers, police officers, firefighters and the like and meant to ensure the welfare of their contributors.
Instead, as a six-month investigation by Institutional Investor reveals, many of these retirement funds are gamed in pernicious pay-to-play schemes. The victims: the public pensioners. The beneficiaries: an assortment of politicians, appointees and professional middlemen whose fees reach into the hundreds of millions of dollars, often undisclosed. The result: “a tableau of corruption” stretching coast to coast, says Robert Plaze, associate director for regulation of the division of investment management at the Securities and Exchange Commission.
Telling this complex story with clarity and impact are Imogen Rose-Smith, II’s enterprising fund writer, and Ed Leefeldt, a gumshoe journalist from the Wall Street Journal. Lending grace of style and structure is II Americas editor Michael Peltz.
In this issue we also highlight the best work done this year by Wall Street’s top equity analysts according to a survey of the buy-side firms that depend on their services. The 38th annual All-America Research Team showcases those analysts who most effectively and consistently find value for investors.
Bright lights all.
