Forbescover story this week is a tough indictment of the private-equity real estate business—and the pension funds that supply their so-called opportunity funds with much of their investment capital. It’s rare to see such a scathing takedown in the business press.

The magazine’s Stephane Fitch does a good job of peeling back the protective covering that’s been applied by the industry and shows that its returns are typically not worth what investors are paying for them. But even more interesting is how government pension funds are collaborating—in what Forbes calls “an epidemic of self-censorship” and “a legally sanctioned cover-up”—with private-equity to keep their investment returns hidden from the public.

Why? Pension funds are afraid the funds won’t let them invest if they disclose their returns to the public. Several funds have threatened to do just that, an odd stance for a business that routinely touts its outsized returns of 20 percent and more.

Forbes questions the financial sleight of hand used to inflate those returns. The problem is that return boost is provided by loading the funds up with debt, which magnifies returns when prices go up but does the same for losses when they go down. And guess what? Prices are going down, something the magazine says could lead to big losses for the pension funds.

It makes the case that real estate investment trusts and lower-cost funds have provided better long-term returns than private-equity opportunity funds, which in 2007 had $213 billion in equity. That might just be a different investment preference if it weren’t for the outlandish fees private-equity charges to invest—typically 1 percent to 1.5 percent of your total assets per year (for the first few years) plus 20 percent of any profit over a set amount. When they lose money, of course, they don’t take on 20 percent of the losses, as Forbes emphasizes. Publicly traded REITs on the other hand, are just stocks that anyone can buy for the low, low cost of an E-trade commission.

This is the other meltdown—the one you haven’t heard much about. It’s not part of the real estate and credit contagion that started with the subprime calamity, then spread to all corners of the debt market. This misadventure has its own origins in hubris, battered further by dumb mistakes and bad timing. The catastrophe may not stack up quite as high as the $350 billion in writedowns that investment funds and banks have registered in the bond markets, but for small investors all across America whose retirement pools poured 1% to 5% of their assets into opp funds, heavy losses—only beginning to surface—could be a sizable blow. If the setbacks for pension funds are severe enough, it could force state governments to raise taxes to cover shortfalls and induce companies to cut back on dividend payments to shareholders in order to set aside additional money for their private workforce pensions.

In a good sidebar to the main piece, Forbes’ Kai Falkenberg writes that the top investment officer for Virginia’s retirement system had workers ship documents back to the private-equity funds so they wouldn’t be subject to open-records law requests.

She reports that thirteen states now have exemptions in their open-records laws that allow pension managers to not disclose investment returns on private-equity funds (all of them, not just the real estate ones).

Requests for private equity performance figures have been blocked by statutes forbidding the disclosure of “trade secrets.” Massachusetts keeps hidden all commercial or financial data whose revelation could cause competitive harm. South Carolina’s freedom of information law now excludes “proprietary” information from the state’s venture capital program but, strangely, includes rates of return. In Alaska, despite broad open-records laws, the $39 billion Permanent Fund has no obligation to disclose performance data for any of its investments in private equity funds.

Forbes does a service by hitting the secrecy issue as hard as it does, as well as by scrutinizing the claims of private-equity funds. These pension-fund managers are going the wrong way by concealing information. They have power to bring the private-equity industry out in the sunshine—the billions of dollars they have to invest.

We’d like to encourage more hard-edge investigative work from Forbes.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.