Placement agents seeking pension fund investments for their clients ranged in size from Wall Street heavyweights to smaller independent firms, documents show.
By Walter Hamilton and Jack Dolan
January 15, 2010
Reporting from Sacramento and Los Angeles – The obscure intermediaries that were paid millions of dollars to win investment business from the California Public Employees’ Retirement System ranged from Wall Street heavyweights to small independent firms.
But all shared a common pursuit: grabbing a piece of lucrative consulting work in what has become a pension-fund bonanza.
Documents released by CalPERS on Thursday show that a variety of firms with differing backgrounds and expertise were paid tens of millions over the last decade for acting as intermediaries between investment managers and the pension-fund giant.
The top 10 placement agents — including one firm headed by a former CalPERS board member and another that was merged out of existence a decade ago — took in more than $125 million, according to the documents.
Private equity firms and other money managers pay placement agents to help them win business from — or be “placed with,” in industry parlance — CalPERS.
Agents say they are a vital part of pension investing, using their financial expertise and contacts to bring valuable information and opportunities to huge pension funds hungry for profitable investments.
To critics, however, placement agents are little more than insiders who capitalize on personal connections to reap huge paydays. And the fees they’re paid indirectly reduce the investment performance of CalPERS’ funds, critics say.
“The list clearly illustrates that firms ranging from Wall Street elite to those with only the barest of investment credentials have been feeding at the trough,” said Edward Siedle, head of pension-consulting firm Benchmark Financial Services.
Placement agents say they perform necessary services and do extensive legwork on behalf of their clients.
M3 Capital Partners in New York was paid more than $3 million for arranging CalPERS investments, according to the documents.
The small investment bank, which focuses on real estate investments, has facilitated more than 200 deals since 1991. Only one of them, a 2005 investment in an Asian real estate fund, involved CalPERS, said George Ahl, an M3 principal.
He gets paid for his expertise in real estate investing, not for schmoozing politicians, Ahl said.
“Everybody’s been painted with this brush of having political connections. We have none,” Ahl said.
The CalPERS list shows that firms earned sometimes staggering sums.
The highest-paid firm — Arvco Capital Research of Stateline, Nev. — took in almost $59 million, more than three times the amount that went to the next-highest-paid firm.
Arvco is headed by Alfred J.R. Villalobos, who was a CalPERS board member from 1993 to 1995. Villalobos did not return a message left at his office.
Four of the top 10 firms on the CalPERS list are prominent Wall Street investment banks, including Credit Suisse, UBS and Lazard. Another firm — Donaldson, Lufkin & Jenrette — was bought by Credit Suisse a decade ago.
At the other end of the spectrum are tiny firms such as Van Rensaleer Co., run by Joseph Barish and Leesa Speer-Barish.
Van Rensaleer was paid more than $520,000 as the placement agent for Darby Overseas Investments, the private-equity arm of mutual fund giant Franklin Templeton Investments of San Mateo. Darby runs two European-based investment funds.
Van Rensaleer was hired to “introduce” Darby to CalPERS, “arrange follow-up meetings and otherwise facilitate communications,” according to the documents.
Among other firms in the top 10:
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