Calpers is short for California Public Employees' Retirement System. But everyone calls its Calpers, perhaps because the official name is too long. Calpers is losing a lot of money on risky land deals, and the state ought to be asking what the money was doing in volatile investments. All those retired people and those about to retire ought to ask the same thing.

Looking at how Caplers used its money, The Wall Street Journal writes "It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America." So, like a lot of college endowment, it is looking at real trouble funding its obligations. In the case of Calpers things are so bad that local governments in the state may have to come up with money to help people as they move into their golden years. Those governments are already running deficits because of the California's deep recession.

It is extraordinary that retirement funds and school endowments don't have strict rules about how money is invested. In a boom, the firms would miss out on some of the out-sized returns, but at least they would still be standing when the market faltered badly. Pension funds should not ever be in a position where they can destroy the savings of their members.

Calpers will not be the last of these retirement funds to blow up. And, a lot of folks who need the money will be left out in the cold--literally.

Douglas A. McIntyre is an editor at 247wallst.com.

This post is part of a feature in which he wonder whatever happened to some notorious financial felons. See all 17.

There was one company that I believed in during my journalism career. It was a scrappy underdog challenging the establishment and made scads of money. Back in the day, it was sure easy to root for Enron, and Andrew Fastow was one of the reasons why.

Fastow was not suave like his boss Jeffrey Skilling -- whom I met several times -- and lacked the people skills of President Bush's pal Chief Executive Ken "Kenny boy" Lay. No, Fastow was a humorless number cruncher. His importance to Enron can not be overemphasized. As Time magazine notes, "Fastow had a skill Skilling needed; he did asset 'securitization,' a means for banks to sell off risk in the form of securities backed by mortgages or other obligations."

Wow, the roots of today's financial difficulties can be traced back to Enron!

There is nothing evil. about special-purpose entities. At first, Enron's initial investors did well because the deals were straightforward. CalPERS, put $250 million into an spe called jedi i, which invested in natural gas projects. Four years late, the California State Pension Plan CalPERS got back $433 million, a 73% return over four years.

Harvard is an easy target for the woes of our economy. Its business school produced George W. Bush, the fellow who's presided over the current economic catastrophe, and Rick Wagoner, the CEO of the largest automobile maker who's led its stock down 95% in the last eight years and now wants $25 billion worth of taxpayer money to keep the millions rolling into his bank account. But Harvard had these folks for just two years, so it's tough to blame the school for the current predicament.

However, with $36.9 billion in assets (as of June 30), Harvard also has the largest endowment of any university. And thanks to its big exposure to very illiquid interests in venture capital (VC) and private equity (PE) firms, Harvard leads a growing list of limited partners (LPs) which are selling stocks and those very illiquid interests in order to come up with the cash needed to fulfill their capital calls to these partnerships.

This requires some explaining. VC firms raise money from limited partners such as wealthy individuals, foundations, pension funds, and endowments. But the LPs don't write checks up front -- instead they hold onto their cash and must write a check when the VC calls and asks for the money when the VC is on the verge of making an investment. The problem for many LPs like Harvard is that much of their stock portfolio is locked up in hedge funds and these illiquid VC and PE interests.

The Dow lost 385 points this week with a 315 point election day rally on Tuesday, two consecutive days which totaled 929 points down, and a Friday rally of 248 points. Did the market rise on hopes of a McCain upset only to fall due to disappointment that Obama won? Did the market rally Friday because the 6.5% unemployment rate was not as bad as expected? It could be, but I doubt it.

More likely, the markets are moving because of the trading behavior of endowments, pension funds, and hedge funds. They make decisions for very different reasons. But some reporting on daily market movements looks like a joke -- nobody knows why the market goes up or down, but commenters use price movements as a daily barometer of the national mood. So how do endowments, pension funds, and hedge funds move the markets? Here's how:

• Endowments. Big university endowments, such as Harvard's, are desperately trying to unload billions of dollars worth of illiquid interests in venture capital and private equity firms. Harvard is reportedly trying to dump $1.5 billion worth of such interests into a market where there is likely to be very little interest. Not only that, these private equity firms are demanding that endowments fork over the money they committed to them so they can make new investments. And with the S&P 500 down 36.6% so far this year, many endowments are selling anything liquid to meet these commitments and to pay shorter-term obligations -- such as paying professors and keeping the lights on.

The commodities fad took a major step toward becoming an investment trend when investment giant Calpers -- the $240 billion California Public Employees' Retirement System -- announced it may increase its commodities investments 16-fold to $7.2 billion through 2010, Bloomberg News reported Thursday.

Calpers, the largest pension fund in the United States, said it would hold between 0.5% and 3% of its assets in commodities. Last year the fund invested $450 million in commodities.

Strong emerging market growth, particularly in China and in sections of Latin America, has created a bull market in oil, commodities and raw materials, and many economists say these assets are likely to outperform both inflation and selected investment classes in 2008, and possibly for a longer time period.

The Standard & Poor's GSCI index of 24 commodities is up 10% so far in 2008, following a 33% gain in 2007. Meanwhile, the Standard & Poor's 500 Index of stocks is down 6% this year, while U.S. Treasuries have netted a 2% return.

Both Merrill Lynch (NYSE: MER) and Citigroup (NYSE: C) plan to raise a great deal more money to shore up their battered balance sheets, mostly from foreign governments.

According to The Wall Street Journal, "Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund. Citi could get as much as $10 billion, likely all from foreign governments."

While the investments may raise questions in Washington about overseas capital controlling large interests in US financial companies, it also begs a more interesting question. Why aren't large pools of US capital investing in US companies? Certainly Warren Buffett or Calpers have the funds to take large pieces of companies like Citigroup.

The answer may be that sovereign funds have a much longer time horizon to get their money back. That would make sense since they only answer to their governments.

The only other explanation is that US institutions don't have much faith in the American economy and financial structure.

Douglas A. McIntyre is an editor at 247wallst.com.

With the deal market drying up, private equity firms need to find unique niches. One player that has been quite successful at this is Silver Lake Partners, which focuses primarily on tech deals. Some of its transactions include Flextronics, Avaya, Sabre Holdings and SunGard Data.

Silver Lake is now expanding its franchise. The firm recently hired Charles Giancarlo, the former Chief Development Officer at Cisco (NASDAQ: CSCO). Keep in mind that he was apparently a candidate for the CEO spot.

Then today, Silver Lake announced big news -- the firm has entered a "long-term strategic partnership" with the California Public Employees' Retirement System (CalPERS). The transaction calls for a 9.9% stake in Silver Lake and there will likely be more investments in future funds.

No doubt, we will see other private equity firms move into the tech space. However, this is far from easy -- especially since Silver Lake is continuing to improve its platform.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Under the category of "the stock market did not need this additional headwind," some of the largest public pension funds have been selling shares in a big way, The Wall Street Journal reported Tuesday.

The Journal said the New York State Teachers' Retirement System, the New York State Common Retirement Fund, the Teacher Retirement System of Texas and the Florida Retirement System Pension Plan are all funds that are reducing stakes in U.S. companies. Collectively, these funds control more than $500 billion in assets.

Further, and equally significant, the nation's largest fund, the $250-billion California Public Employees' Retirement System (Calpers) is considering shedding its home-country bias, the Sacramento Bee reported.

One plan calls for Calpers to reduce U.S. equities exposure to 28.4% from 40% and increase international equities exposure to 28.4% from 20%. The Calpers Board of Directors is expected to vote on the measure next month.

Here's a novel idea: Pay someone only if they are providing better performance than no one -- not anyone, no one -- could provide.

Well according (subscription required) to The Wall Street Journal, the California Public Employees Retirement System (Calpers) is contemplating doing just that with the money managers it hires: "Calpers' investment staff plans to present to the board a system in which the pension fund's global stock managers would receive a fee only if they outperformed certain benchmark indexes. Managers whose returns failed to beat the index would be paid nothing for that period."

This makes perfect logical sense. Why pay a management fee to someone who's doing worse than an index fund? But the possible risk is that paying strictly for performance would induce managers to take bigger risks -- possibly increasing the incidence of blow-ups and rogue traders.

But these kinks could probably be worked out with careful monitoring of risk, and tailoring the bonuses to the level of risk a manager assumed. But it's time for money managers to be paid for performance. Too often, it seems they are paid just for having a pulse.

Earlier this year, private equity firm Fortress Investment Group (NYSE: FIG) had an IPO. Blackstone is also preparing its own offering and even got China to invest in its firm.

More and more, private equity firms are taking money off the table. The latest? It's Ares Management. The firm sold a minority interest for $375 million this week.

Who was the buyer? Well, Ares didn't disclose that. But, according to a press release, the buyer was a "long-standing client."

And Ares has some biggie clients. Examples include the Canada Pension Plan Investment Board and California Public Employees' Retirement System (CalPERS).

Based in Los Angeles, Ares manages has about $13 billion under management and has been in operation since 1997. The firm invests in a variety of areas, such as high-yield bonds, mezzanine debt, and bank loans.

Like other private equity firms, Ares has been growing at a staggering rate over the past few years. So, why not take some money?

Tom Taulli is the author of various books, including The Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

It is not a secret that Exxon Mobil (NYSE: XOM) has been criticized in the past for being a little "behind the times" in their stance on global warming. Well, there is an effort to get rid of the chairman of the company's public issues committee, Michael Boskin, and now the nation's largest public pension fund is joining the fight.

According to The California Public Employees Retirement System (CalPERS), Mr Boskin, is not fit to lead the company's committee and should be removed from his position. CalPERS claims that Boskin is not fit due to his lack of communication with shareholders regarding the business risks that go along with the current climate changes.

CalPERS owns 30 million shares of Exxon Mobil, so you can be sure that their view on Mr. Boskin is going to have some weight in whether or not Boskin will be able to continue to head the company's public issues committee. With Exxon Mobil being one of the few big oil companies to refuse to accept the role of fossil fuel burning and the impact it has on the environment, it really shouldn't come as too much of a shock when the company declines to candidly discuss the issue with its shareholders.

MAJOR PAPERS:

• Time Warner Inc (NYSE: TWX) senior executives are considering reducing the company's cable-TV holdings over time, reported the Wall Street Journal.

OTHER PAPERS:

• The $27B private equity buyout of Clear Channel Communications Inc (NYSE: CCU) is in greater jeopardy as the California Public Employees' Retirement System, or CalPERS, said yesterday that it plans to vote against the deal, reported the New York Post.
• According to diplomatic sources in Beijing, Iran and North Korea are working to "deepen cooperation" on the countries nuclear weapons technology, reported the Telegraph.
• India's Economic Times reported that Mid-sized Indian pharmaceutical companies including Orchid Chemicals, Strides Arcolab, Glenmark Pharma, Granules India, Shasun Chemicals and Plethico Pharmaceuticals are all looking for acquisitions in Russia, Europe and the United States.

WEBSITES:

• LightReading.com reported, citing a source close to the matter, that Sprint Nextel Corporation (NYSE: S) is considering a buyout of Vonage Holdings Corporation (NYSE: VG) and the two have been in talks to attempt to resolve Sprint's patent lawsuit against the VoIP provider.
• Rumors are swirling that "quality problems" may cause Apple Inc (NASDAQ: AAPL) to delay the launch of its upcoming iPhone, according to LoopRumors.com, citing Smarthouse News Australia.