Spurred by Placement Agent Controversy, CalPERS CIO Voices New Effort; New York’s CIO Eases Placement Agent Ban

CalPERS' Joseph Dear says emerging money managers don’t need placement agents to get hired by the fund giant; New York’s CIO Schloss takes the lead on placement agent relationships. 

(February 26, 2010) – Joseph Dear, chief investment officer at California Public Employees’ Retirement System (CalPERS), said emerging money managers don’t need to go through placement agents to get hired by him and his staff, Pensions & Investments reported.


The $199.5 billion retirement system is reiterating that message to end the view that middlemen are essential to get work with CalPERS, the nation’s largest public pension fund.


According to fund officials, the message is meant to encourage openness and transparency. To transmit that message, the Sacramento-based fund is offering seminars for emerging managers. And last month, CalPERS hired Tim Legesse as its new Investment Officer for Diversity to educate emerging managers on how to work with CalPERS, Pensions & Investments reported.


Efforts to dissuade the influence of placement agents come as CalPERS, the California State Attorney General’s Office and the U.S. Securities and Exchange Commission investigate millions of dollars in fees paid by money managers to middlemen for more than 10 years.


As CalPERS is working on ending the perception that placement agents are crucial to getting hired by the fund, New York’s new CIO Lawrence M. Schloss has a different approach. Schloss, who was previously chairman at private equity firm Diamond Castle, is trying to ease restrictions of placement agents doing business with city pension plans.


Instead of a complete ban on placement agents, Schloss recommended rules that “allow legitimate placement agents who provide value-added services” be implemented, according to a  news release issued by New York City Comptroller John C. Liu’s office.


“In light of the recent controversy surrounding the use of placement agents by New York State pension funds, these new policies are practical, straightforward and enforceable…We look forward to investing with the best in class asset managers whether or not they utilize placement agents or third-party marketers,” said CIO Schloss in the release. “We have taken these steps appropriately to eliminate the potential for the types of questionable activity that engulfed the New York State fund in order to better serve the interests of our pensioners. If you want our business, you must be open and honest with us and show us that you deserve it.”


Last year, New York’s city and state officials banned the use of placement agents after New York State Attorney General Andrew Cuomo’s “pay-to-play” probe.