TALLAHASSEE, Fla. — Liberty Partners, a New York private equity investment firm funded solely by the Florida State Board of Administration, received failing grades in a recent review requested by the public pension fund.
The scathing critique by Alignment Capital Group LLC, an Austin, Texas, private equity consulting firm, came to light just days before a Nov. 12 meeting of Edison Schools Inc. shareholders. They were scheduled to meet to approve a $180 million leveraged buyout transaction by Liberty, investing the Florida fund's existing private equity assets. The reports were leaked by officials of the Florida Education Association, Tallahassee, and the Service Employees International Union, Washington, which oppose the investment of the pension fund's assets in Edison, an 11-year-old operator of public and charter schools, because it could result in members losing jobs and because it's a poor investment
Alignment was hired by the Florida pension fund to review its private equity portfolio, and has submitted three reports to Florida officials. The reports hold Liberty responsible for "negative" investment-picking skills, lack of diversification in its investment portfolio, sloppy record keeping and overcharging the pension fund to the tune of at least $88 million since inception in 1993.
In the latest report, submitted July 7 to the pension fund's investment staff, Alignment Capital recommended the fund "terminate the relationship as soon as possible" unless it could renegotiate the terms of the contract.
"The economic difference between Liberty's current terms and the terms currently available in the market is too great to be sustained," noted the report, prepared by Alignment founders Austin M. Long III and Craig J. Nickels.
Mr. Nickels declined to comment on the reports. Mr. Long did not return a phone call.