(April 21, 2010) — Apollo Management has agreed to cut $125 million in fees for funds it solely manages for its oldest and largest investor, the $210 billion California Public Employees’ Retirement System (CalPERS), while dropping the use of placement agents to attract business from the fund giant.
“The strategic agreement announced today is important, in my mind, because it strengthens our long-term partnership with an exceptional asset management firm led by individuals of integrity,” Joseph Dear, CalPERS’ chief investment officer, said in a statement released Monday.
The agreement between the the private equity firm and CalPERS signals an effort among investment managers to align their interests with those of their members in the aftermath of the downturn. According to a CalPERS press release, the two entities “believe that the agreement will set a new standard among pension funds and their investment advisers.”
Under the terms of the new relationship, Apollo, which currently manages more than $4 billion in CalPERS assets, will ban the use of placement agents, a practice that has encountered intense scrutiny over the past year. The deal will require Apollo to provide the fund with quarterly certification that agents have not been employed directly or indirectly. Meanwhile, private equity firm Blackstone Group has withdrawn its objections to placement agent legislation, which has been urged by CalPERS following revelations last fall that proved middlemen got $125 million from private investment funds for arranging deals with the California fund.
In other news regarding the nation’s largest pension fund, CalPERS has changed its policy on investing in real estate to balance its philosophy of socially responsible investing with its drive for long-term returns for its pensioners, the AP reported. The fund saw its real estate portfolio, currently worth about $14.8 billion, lose nearly half of its value from September 2008 to September 2009. The fund’s new real estate policy would end its investments in real estate projects that would eliminate rent-regulated apartments, such as New York City’s Stuyvesant Town-Peter Cooper Village.
“This policy will help us ensure that external managers who deploy CalPERS capital won’t inappropriately displace households in rent-regulated units as a result of their investment strategies,” said Rob Feckner, CalPERS board president, in a statement. “Such strategies have exposed CalPERS to risks and have caused adverse impacts to renters that must not happen again.”
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