Opening the books

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

The earnings figures came to light among 5,000 pages of disclosure documents released by the $200 billion US pension as part of its ongoing review into placement agent activity.

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 amount ARVCO made dwarfed the CalPERS-related fee income generated by every other placement agent that has solicited the pension for investments. A little-known New York firm called Tulling, which made the second highest amount, collected around $17 million. Donald, Lufkin & Jenrette made around $12 million and Credit Suisse collected around $11 million.

The disclosures for the most part related to new investment proposals since May 2009, when CalPERS’ enacted a placement agent disclosure policy, although some firms went above and beyond these standards to voluntarily disclose information about earlier payments. Disclosures were received from 90 percent of the fund managers that work with the pension. The pension did not name the firms that did not comply with the request for information.

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

elsewhere in the documents…

Billionaire Ron Burkle’s investment firm Yucaipa voluntarily disclosed information about payments made before the disclosure policy was introduced. For example, it paid placement firm Wetherly Capital 1 percent on a $200 million commitment the firm received from CalPERS in 2001. Yucaipa also revealed that it is involved in a fee dispute over its second fund, Yucaipa American Alliance Fund II with placement firm Atlantic Pacific, but did not disclose the nature of the dispute.

The Quadrangle Group outlined payments relating to  a key-man event that took place in 2009. When founder Steve Rattner left the firm to join the administration of US President Barack Obama, the firm’s LPs had the option of terminating the investment period under the key-man clause. 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 and UBS were paid $250,000 each for “the successful outcome of the Key Man Election”.

TPG revealed that it has a broker-dealer affiliate, TPG Capital BD, that solicits commitments for TPG-managed funds.