The California Public Employees’ Retirement System has adopted a policy requiring external managers to disclose fees and other information about the placement agents they hire to seek C
The California Public Employees’ Retirement System has adopted a policy requiring external managers to disclose fees and other information about the placement agents they hire to seek Calpers business.
‘This policy will help us ensure that our decisions are made solely on the merits of proposed investments with full transparency and disclosure,’ says Rob Feckner, Calpers board president. ‘We want to know who’s being hired, how much they’re being paid, what they’re paid for, and who pays them.’
Specifically, the policy includes these requirements:
• Calpers investment partners and external managers must disclose their retention of placement agents, the fees they pay them, the services performed, and other information about their engagement.
• Placement agents must register as broker-dealers with the US Securities and Exchange Commission or the Financial Industry Regulatory Authority – or Calpers would decline the opportunity to retain or invest with the external manager or investment vehicle.
• Disclosed information must include agents’ identities, resumes of key people, description of compensation and services, copies of agreements, and if the agent is registered with the SEC or as a lobbyist in any state or national government.
The new guidelines affect partners and external managers who retain placement agents to arrange meetings, prepare presentation materials, identify potential limited partners and otherwise facilitate communication with Calpers regarding potential investment of its assets.
Calpers commits capital to external managers and funds but isn’t involved in the fees that they pay agents who may represent their business to the pension fund.
The policy was developed following recent public disclosures about ‘pay-to-play’ allegations at other public pension funds.
‘This policy will strengthen overall confidence in our decision-making and prevent impropriety and the appearance of impropriety,’ says George Diehr, chair of the Calpers chief investment committee.
The proposed policy statement says, in part: ‘Calpers adopts this policy to require broad, timely, and updated disclosure of all placement agent relationships, compensation and fees. The goal of this policy is to help ensure that Calpers investment decisions are made solely on the merits of the investment opportunity by individuals who owe a fiduciary duty to Calpers.’
The policy would apply to all external manager agreements made after adoption and to existing agreements if their terms were extended or if there were new Calpers commitments to funds. In addition, the policy would apply to partnerships in which Calpers has a majority ownership interest.
CalPERS already follows several other statutes, regulations and policies to ensure ethical conduct, ensure compliance with fiduciary responsibilities and to prevent conflicts of interest involving board members, employees and consultants. Other guidelines include conflicts of interest policies for consultants; pension and health plan participants; and an insider trading policy to ensure compliance with federal securities laws.
