Cerberus’s Three Heads on the Block?

Cerberus-BlakeAccording to Reuters, Cerberus Capital is going to sell its gun-maker holding company, the Freedom Group, immediately.

Cerberus is responding to threats from the massive CalSTRS retirement fund, a public employees’ retirement fund which manages its investments primarily for political and social reasons, to disinvest its large stake in Cerberus. (How large? Three Quarters of a Billion large).

CalSTRS may simply need the cash. Under the accounting standards required for private firms, it would be bankrupt, as it is massively underfunded by the California government, and its social investment policy yields low returns (1.8%!). It’s around $60 billion in the hole now, and admits it would need to boost input by $3 to $4 billion a year to close the gap, and that’s using their laughable actuarial assumption of a 7.75% no-risk return, not their actual 1.8%.

The rapid growth of the sector has led Cerberus’s financial results for years. Freedom Group’s 2012 results to date are well over $100 milion higher than the same period in 2011.

Freedom Group includes many of the most recognizable names in guns, including Bushmaster, Parker, Remington, Marlinm H&R 1871, and lesser known one such as Daota Arms, ParaUSA, DPMS /Panther, silencer maker Advanced Armament, and most recent acquisition Tapco among others.

2 thoughts on “Cerberus’s Three Heads on the Block?

  1. Rich

    I wonder how many people counting on that retirement fund realize how badly under funded it is, and how blatantly they’re being screwed. Whichever actuarial firm (assuming they had to hire one, and don’t get to arbitrarily set whatever they want) did those analyses should be sued for malpractice, even if they were heavily pressured to do so (which I’m sure they were). Well, at least they aren’t using the CPI for their assumed wage inflation rate…

    As a side note, I’m really regretting not buying some RGR yesterday.

    1. Hognose Post author

      Underfunding is pretty typical for public pensions. The feds don’t fund their defined benefit pensions at all, just pay as they go. State and muni type pensions don’t have to meet the standards private defined benefit pensions must. So they get audited but all the auditors can really say is, “yeah, these are the numbers they say work, and these are the actuarial assumptions they base them on.” completing the sentence with, “and those assumptions must come out of a crack pipe” is left as an exercise for the reader!

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