Christopher Witkowsky
The $182bn pension, the largest in the US, will negotiate with private equity firms for fee reductions on all new commitments. The practice follows a policy the pension implemented in March to negotiate fee reductions with hedge funds.
The bank, which inherited the placement agent business following its merger with Merrill Lynch, will use a smaller team to manage its current clients, but will not take on any new clients.
Investors in private equity funds believe one-quarter of private equity managers will fail because of the financial meltdown, and one out of every 10 investors in private equity will default on capital calls, according to recent surveys.
As some US public pensions move to ban the use of placement agents, Mike Travaglini, the executive director of the $38bn Massachusetts PRIM, warned agents play a vital role in helping his small staff identify private equity and real estate opportunities.
Poor performance and the inability to affect turnarounds with minority stakes has caused Sun Capital to discontinue making new investments from the hedge fund it raised in 2006.
Net asset values will decline more over the next few quarters, brining allocations back into balance, according to a white paper published by the secondaries specialist.
The inspector general of the US Pension Benefit Guarantee Corporation said it has found improper communications between the agency’s former director, Charles Millard, and investment firms bidding for contracts to manage the agency’s $2.5bn allocation to private equity and real estate. US Congress is now investigating the issue.
Steve Moseley, who joined private equity advisor StepStone in 2008, said he is not a target of the ongoing pay-to-play investigation, but cited as a ‘distraction’ media reports about a co-investment platform created for New York’s state pension while Moseley was at a separate advisory firm.
In an effort to encourage private equity and venture firms to establish funds based in RMB, the Chinese government is drafting rules and regulations that would allow various types of institutions in China to become investors in private equity funds.
The largest pension in the US has charged its staff with creating a disclosure policy for placement agents and their fees after it was revealed that CalPERS has ties to a kick-back scandal involving the New York State Common Retirement Fund.