Kentucky hires Altius for private equity

Altius Associates will replace Strategic Investment Solutions as private equity consultant for the Kentucky Retirement Systems, which has been burdened with pay-to-play investigations this year.

The $14 billion Kentucky Retirement System has hired Altius Associates as its private equity consultant. Altius will replace Strategic Investment Solutions.

Details of the contract were not available, as the contracts were still being worked out, according to TJ Carlson, chief investment officer at the retirement system.

Altius manages around $18 billion for clients, predominantly via segregated mandates. Earlier this year, the firm lost out on a mandate for the Teachers’ Retirement System of Texas, which chose Hamilton Lane as its domestic and international private equity advisor. Altius was formed in 1998 and is headed by John Hess, who previous founded and ran the private equity placement business at Helix Associates, and co-founder Jenny Fenton.

Kentucky’s private equity programme has been beset with pay-to-play accusations this year that have led to various investigations. In October but the US Securities and Exchange Commission sent subpoenas to several current or former staff members.

The SEC also told attorneys for the system that it wants to talk to all individuals who have served on the pension board of trustees since 2007.

In June, Kentucky state auditor Crit Luallen found that the pension did not engage in pay-to-play practices after the conclusion of an internal audit. The audit found that the pension’s former CIO, Adam Tosh, failed to disclose the use of one placement agent in violation of the pension’s disclosure policy, according to a report issued by the auditor. However, no evidence of pay-to-play activity was found.

The state audit followed an internal audit by the pension in July 2010 showing that Tosh used Glen Sergeon as a placement agent. The report found that Sergeon, working with three firms called Diamond Edge Capital Partners, Bleecker Street Partners and Cazanave, secured six investments worth $426 million for private equity managers from the pension and was paid nearly $6 million in fees.

Sergeon and Tosh had worked together on a global emerging markets strategy when Tosh was CIO at the Pennsylvania State Employees’ Retirement System. Tosh resigned from Kentucky in June 2010 to join investment consultant RogersCasey in Connecticut.