CalPERS Launches Placement Agent Review

Just got back to my hotel room in Dallas, and was greeted by an enormous stack of papers sent over by CalPERS.

The first one is a press release, announcing that the pension system is “initiating a special review of the fees paid by its external managers to placement agents and their related activities.” The rest appear to be disclosures made by various external managers about fees paid to ARVCO Financial Ventures, a placement agent led by former CalPERS board member Alfred Villalobos.

peHUB had previously reported that these documents would be disseminated, and that current CalPERS board member Chuck Valdes is currently under investigation for accepting campaign contributions from Villalobos. The SEC and California Attorney General also are conducting investigations into possible pay-to-play at both state and municipal pension funds in California.

CalPERS so far has learned that external managers paid more than $50 million in fees to Villalobos, including by firms like Apollo Management. In fact, the bulk of the CalPERS documents relate to Apollo, while others relate to Ares Management and Aurora Capital Group.

Worth noting that CalPERS could have known about these fees from the get-go, if it had instituted even a modest disclosure policy (it added one recently, and a related state law was signed yesterday). The reason anyone cares is that CalPERS is twofold: (1) How much does someone like Villalobos stand to gain by trading on his CalPERS board relationships; and (2) How much is CalPERS indirectly paying Villalobos, since external managers generally pay placement agents from the pot of management fees contributed by limited partners.

As I’ve said repeatedly over the past year, this is far from over…