The California Public Employees’ Retirement System (CalPERS) announced today that it is initiating a special review of the fees paid by its external managers to placement agents and their related activities.
The review was sparked by the recent receipt of information provided to CalPERS by investment funds that reported their payment of more than $50 million in fees over a five-year period to ARVCO Financial Ventures LLC, a placement agent firm headed by former CalPERS Board Member Al Villalobos. Villalobos served on the CalPERS Board as the representative of the State Personnel Board between 1993 and 1995.
The special review will assess these and other placement agent fees and arrangements, and will be conducted by Steptoe & Johnson LLP and other independent advisers to ensure a full and fair examination of these matters.
“The placement agent industry has been a focus of state authorities and the Securities and Exchange Commission over the last year, and we believe it prudent to conduct a full review of the matters related to these recent disclosures to us,” said Anne Stausboll, Chief Executive Officer.
Today’s announcement follows the May, 2009 adoption of a new Board of Administration policy on placement agents. The policy is designed to enhance confidence and transparency, and prevent impropriety and the appearance of impropriety, in the system’s investment decisions. Its principles were used as a model for legislation signed earlier this week by the Governor that now requires placement agent fee disclosures by all public pension funds in California.
At the same time it adopted its policy, the Board directed CalPERS staff to ask funds that had received capital in the past to disclose related placement agent information to CalPERS. Those requests yielded the disclosures giving rise to the special review. CalPERS has already informed both the Securities and Exchange Commission and the California Attorney General’s Office of its commencement of the review, and intends to work cooperatively and collaboratively with them in examining these matters as appropriate.
CalPERS is the nation’s largest public pension fund with approximately $200 billion in market assets. The pension fund provides retirement benefits to more than 1.6 million State, school and local public agency employees, retirees and their families, and health benefits to nearly 1.3 million members. For more information about CalPERS, visit www.calpers.ca.gov.