Dear Comptroller DiNapoli: Thanks for Trying, But...
New York State Comptroller Thomas DiNapoli today "announced he has banned the involvement of placement agents, paid intermediaries and registered lobbyists in investments with the New York State Common Retirement Fund (CRF)." It's great that he's finally trying to do something, but this seems over-the-top reactionary. No one has beaten the drums harder on this kickback situation than me, but I can't see how the solution is to place an umbrella ban on placement agents. The vast majority of them -- at least the larger ones -- are reputable organizations that allow investment firms to spend their time investing (instead of fund-raising). So long as the chain-of-fundraising is disclosed -- as I suggested yesterday -- then there is no harm in having a third party represent a PE fund's interests. After all, doesn't New York Common Retirement Fund use a third party (Hamilton Lane) to do most of its due diligence? The problem in New York was corruption aided, abetted and allowed to flourish due to an embarrassing lack of oversight. The single fiduciary system also didn't help, and it boggles my mind that DiNapoli has yet to rectify that situation after two years on the job. After all, the only other state with a similar system is Connecticut, and that state's prison guards got to spend quality time with an ex-Treasurer and an ex-PE firm chief.
