Yesterday Pando reported on secret documents showing that Wall Street behemoth Blackstone was quietly charging enormous fees to public pension funds.

We didn't specifically contrast the firm's record with the public declarations of the firm's CEO, Stephen Schwarzman. However, that's something worth doing -- especially considering Schwarzman's recent comments defending the controversial high-fee investments that his firm oversees.

Before getting to those statements, recall that Schwarzman is the same CEO who infamously insisted that increasing taxes on the wealthy is "like when Hitler invaded Poland in 1939." Recall, too, that Schwarzman is famous for throwing himself a $3 million birthday bash and for his generally opulent lifestyle. With the Wall Street Journal reporting that “about $37 of every $100 of Blackstone’s $111 billion investment pool comes from state and local pension plans,” that lifestyle is effectively supported by public employees' retirement nest eggs.

Because of Schwarzman's headline-grabbing flamboyance, his incendiary rhetoric and his status as a billionaire, the Blackstone chief has developed a prominent platform, and in recent days, he has used that platform to try to shape the debate over Wall Street's high-fee firms. Indeed, during a conference last week, he urged individual investors to follow public pension funds in putting more of their savings into hedge funds, private equity firms and other so-called "alternative investments."

The comments stand in stark contrast to those like Warren Buffett who have said exactly the opposite. And so to further justify his position, Schwarzman offered up some numbers:

“The stuff we do, the alternative class, tends to make around 1,000 basis points more than the stock market,” Schwarzman said today in an interview with Bloomberg Television’s Erik Schatzker and Stephanie Ruhle at the Milken Institute Global Conference in Beverly Hills, California. Investors shouldn’t be concerned about a “stomach issue” since Blackstone loses virtually no money in its funds, he said.

It all sounds great, except for one thing: Schwarzman's figures appear to be contradicted by data PandoDaily analyzed in its investigation of Blackstone and public pension investments.

As SEC whistleblower Chris Tobe explained to us, in 2013, according to Kentucky Retirement Systems data, Blackstone's fund of hedge funds (BAAM) earned an 11.54 percent return for the pension system.

That wasn't "1,000 basis points more than the stock market." As Tobe notes, it was, in fact, 2000 basis points below the S&P 500, costing public pension funds millions. In Kentucky alone, Tobe estimates that the one-year underperformance cost the state $78 million that it could have made had it invested the money in a low-fee S&P index fund. Tobe added that a hefty chunk of the underperformance could be attributed to Blackstone's management fees.

These figures are not surprising, of course. As The Economist just reported, “The average return of hedge funds has lagged a plain-vanilla portfolio (in) nine of the past ten years." Additionally, the Government Accountability Office and the Department of Labor have raised questions about whether the purported valuations of private equity holdings can even be trusted because those holdings are often not independently audited. Consequently, recent academic research has challenged the core presumption that alternative investments in private equity and real estate typically outperform the market.

On the question of private equity returns in particular, Brad Case, senior vice president at the National Association of Real Estate Investment Trusts, said of Schwarzman's comments: "I have never seen any evidence at all that 'the alternative class tends to make around 1,000 basis points more than the stock market. There is plenty of evidence that there's either no difference in net total returns between private equity and equivalent traded assets or that private equity returns are actually inferior."

Pointing to the aforementioned academic research about alternative investments, Case says "the findings are pretty damning for Mr. Schwarzman's claim."

Businessweek reports that at the same conference Schwarzman made his comments defending alternative investments, he also appeared on a panel with fellow billionaire Kenneth Griffin and said public institutions should more quickly fire underperforming employees. It seems nobody bothered to ask him if that principle should apply to public pension officials when they consider alternative investment managers whose high-fee models end up underperforming the S&P 500.

Pando requested comment from Blackstone on Monday afternoon about the gap between Schwarzman's statements and the data. Blackstone did not respond to the request for comment.

[Photo credit: World Economic Forum (Creative Commons)]