The private equity industry has lost a forceful advocate for diversity who spent a large part of the last year working to reverse what had been perceived as a slackening of support for emerging managers by the US’ largest pension system.
Ed Dandridge, the president and chief executive officer of trade group The National Association of Investment Companies, stepped down at the end of January. He was replaced on an interim basis by NAIC special advisor Robert Greene, an executive with Syncom Venture Partners. NAIC has not yet begun the search for a new chief executive, according to NAIC chairman David Perez, president and chief operating officer of Palladium Equity Partners.
“Ed [Dandridge] was very effective in a year. He pushed the ball forward many yards and in many different directions,” Perez told Private Equity International in an interview Monday. Dandridge is returning to the private sector, taking on a chief marketing officer role in the media industry.
NAIC represents emerging and mostly diverse private equity firms and includes some of the biggest names in the emerging manager community, including Vista Equity Partners, Sycamore Partners, Palladium, Pharos Capital Group, GenNx360 Capital Partners and Clearlake Capital Partners.
Its leadership is generally derived from its members, including Greene, who leads Syncom Venture Partners’ business development and investor relations activities.
Dandridge was appointed to lead the organisation in December 2011. Prior to NAIC, Dandridge worked as chief communication officer at Nielsen for three years.
Dandridge wasted little time in outlining goals for his tenure, which he expected to last two to three years, including the creation of the first-ever performance survey of NAIC's members. However, Dandridge also quickly became embroiled in a clash with the California Public Employees’ Retirement System that roiled the industry and has yet to find resolution.
Many within the emerging manager community had been quietly complaining that CalPERS was abandoning its emerging manager strategy in favour of making larger commitments to bigger, brand-name firms.
A particular point of contention was CalPERS’ breaking off of its relationship with Centinela Capital Partners, its
Ed [Dandridge] was very effective in a year. He pushed the ball forward many yards and in many different directions.
domestic emerging manager fund of funds. CalPERS officially terminated the Centinela relationship last year after committing $1 billion to the fund of funds since 2006, and handed the reins of the programme to Credit Suisse Customized Fund Investment Group with a $100 million mandate. Some emerging managers viewed the $100 million commitment as a withdrawing of support by CalPERS compared to the $1 billion it had previously committed.
CalPERS, while vigorously defending its dedication to emerging managers, also contended its emerging manager investments across asset classes were underperforming. However, NAIC, under Dandridge’s leadership last year, compiled and published its first-ever emerging manager performance survey. The survey revealed that its members — mostly small, diverse managers — greatly outperformed bigger, more established shops. While NAIC studied its own members, CalPERS based its performance analysis on its entire emerging manager portfolio.
“[The report] is a call to action for institutional investors everywhere that have yet to fully embrace diversity as a factor when seeking to do business with the best in class – a prerequisite to achieving a sustainable rate of return over the long haul,” said Connecticut’s state Treasurer Denise Nappier in NAIC’s report.
CalPERS did not return a request for comment Monday.
NAIC also clashed with CalPERS’ officials about the system’s perceived mistreatment of the emerging manager community, including claims it had not properly explained its decision to reject re-investments with managers in the emerging manager programme.
The escalating tensions culminated in a hearing hosted by California state Senators Curren Price and Gloria Negrete McLeod in the fall to examine CalPERS’ efforts around emerging managers. CalPERS defended its position as a pioneering emerging manager investor that continued to support the strategy, while Dandridge and others relentlessly questioned the system’s dedication to the strategy.
“It’s not my job to make managers happy,” CalPERS chief investment officer Joe Dear said during the hearing. “I recognise our restructuring work and our focus on performance have caused some concern among the emerging manager community.”
Much has changed since the hearing – Dandridge has left NAIC, while Negrete McLeod won a seat in the US Congress and Senator Price is running for a seat on the Los Angeles City Council. It remains to be seen if the momentum NAIC and Dandridge built up over the past year on publicising its concerns about CalPERS' emerging manager strategies will fade. The status of NAIC’s talks with CalPERS is unclear and it's also not certain how the organisation will continue to approach its relationship with the pension system.
Still, after state elections last year, California state Legislature’s Latino caucus had 24 members (out of total 120 seats), and it may be the issue of diversity among investment managers NAIC fought to highlight will be taken up by the new crop of leadership in the Legislature, Dandridge said.