It's Time To Change The Way Funds Get Raised
The New York kickback scandal made new headlines yesterday, after state Attorney General Andrew Cuomo filed a criminal complaint against Raymond Harding, former chair of New York's Liberal Party, for scheming with the already-indicted David Loglisci and Hank Morris. Cuomo also coaxed a guilty plea and financial remuneration out of Barrett Wissman, a crooked former hedge fund manager. You can read more here, including the Harding complaint. All of this got me to thinking more about the issue of raising fund capital from public pension systems, a process that often is just begging to be corrupted. Inexperienced and smaller GPs can have real difficulty getting in front of a pension system’s investment staff, because there is rarely a transparent or streamlined process. The result is that many of these GPs hire a “finder,” which is typically a politically-connected individual who can gain access from the top-down. Most of these finders aren’t splitting their fees with the pension system’s investment staff – a quid pro quo that allegedly occurred in New York – but even the most above-board of these relationships boils down to influence peddling.
