Ethics probe-linked firm collects most placement fees for CalPERS investments

Pension documents detailing ARVCO's fee income related to CalPERS also reveal TPG has a broker-dealer affiliate and that Quadrangle paid a fee to UBS for the successful outcome of an LP vote to preserve the investment period on its latest fund.

ARVCO Financial Ventures, a placement firm run by a former board member of the California Public Employees’ Retirement System, has received more than $58 million in fees from fund managers for work on securing commitments from CalPERS.

The amount ARVCO has made dwarfs every other placement agent that has solicited investments for fund managers from the pension, according to more than 600 placement agent disclosures the pension released Thursday as part of its placement agent review initiated last spring. A little-known New York firm called Tulling, which made the second highest amount, collected about $17 million. Donald, Lufkin & Jenrette made about $12 million and Credit Suisse collected about $11 million.

ARVCO was linked to an ethics probe by the California Fair Political Practices Commission last year, which found that CalPERS board member Charles Valdes violated state campaign contribution laws by accepting contributions from individuals that exceeded the state limit. Most of the individuals were associated with Alfred Villalobos, who runs ARVCO.

The disclosures for the most part relate to new investment proposals since May 2009, when CalPERS’ enacted a placement agent disclosure policy. But some firms voluntarily disclosed information provided by managers with ongoing commitments to pay placement agents for existing investments.

The disclosures were obtained from more than 90 percent of the fund managers that work with the pension in response to CalPERS’ disclosure policy. The pension has not released the names of the firms that did not comply with the disclosure request.

Some firms, like billionaire Ron Burkle’s investment firm Yucaipa, voluntarily disclosed information about past payments. Yucaipa, for example, paid Wetherly Capital, a placement firm, 1 percent on a $200 million commitment the firm received from CalPERS in 2001.

“We think it is important to recall that a substantial due diligence was performed on Yucaipa not only by CalPERS’ [alternative investment] staff, but also a full review and ranking was performed on Yucaipa by McKenzie Consulting … and Yucaipa’s YCI fund was ranked [number one] from amongst a large group of candidate funds,” the firm said in its disclosure letter.

In light of recent questions raised about placement agents, we are working aggressively to take measures to provide transparency, adopt thoughtful reforms and restore trust in our system.


Other interesting facts come to light in the disclosures. The Quadrangle Group, for example, outlines a key-man event that took place when founder Steve Rattner left the firm in early 2009 to join the administration of US President Barack Obama. The firm’s LPs had the option to terminate the investment period after the key-man clause was triggered.

Quadrangle paid fees to one of its employees, Ivan Nedds, and certain employees with UBS, to help make sure the LPs voted to preserve the commitment period. Nedds was paid $250,000 for “the successful outcome of the Key Man Election”. UBS, out of a $1 million fee, was paid $250,000 based on the successful outcome of the election.

TPG revealed in the documents that it has a broker-dealer affiliate, TPG Capital BD, that solicits investors for commitments.

CalPERS has been undertaking a “special review” of placement agent activity related to the pension’s investments. “Gathering information is not enough. We remain firmly committed to pursuing a full and fair examination that the special review will provide,” according to Anne Stausboll, the pension’s chief executive officer.

“In light of recent questions raised about placement agents, we are working aggressively to take measures to provide transparency, adopt thoughtful reforms and restore trust in our system,” she said in a statement.