CalPERS’ Board Votes To Restrict Placement Agents

(November 19, 2009) – In the latest chapter of the placement agent saga, the California Public Employees’ Retirement System (CalPERS) has agreed to tighten rules regarding these besieged middlemen.

The $200 billion CalPERS’ board voted on Monday to make the disclosure of fees paid to any such middleman a requirement for all money managers hoping to do business with the fund. The board had been advised to do so by investment and legal staff—as well as Wilshire Consultants, which advised the fund—in order to abide by a newly enacted California state law. According to the Associated Press (AP), Wilshire also has suggested that investment managers should face harsh penalties, including penalty-free withdrawals. CalPERS CIO Joe Dear believes that the move will create more transparency within the investment management business, the AP reports.

However, CalPERS’ board may not stop there: The fund has reportedly asked staff to explore options that would require placement agents to register with the Securities and Exchange Commission (SEC).

Placement agents have been under siege since this spring, when the New York State Common Retirement Fund was engulfed in a scandal relating to the State Comptroller’s friends using their proximity to the fund’s power structure to enrich themselves. Numerous state pension funds, New York State Attorney General Andrew Cuomo, and the SEC have taken action against these people and firms that introduce alternative and traditional asset managers to asset owners.