Deja Vu: Quid Pro Quo?

A number of you have been wondering about the timing of last week’s Pacific Corporate Group announcements. First came a press release detailing how the firm had split itself into two separate legal entities, along with glowing praise from CalPERS executives. Next came a press release about how CalPERS had awarded PCG two $400 million mandates. As many of you asked: “Was this a quid pro quo?”

PCG insists that such a conclusion is inaccurate, and that CalPERS did not mandate the legal split before awarding the mandates. Instead, it says that it’s been working on such a split for some time – in consultation with CalPERS, but only among others – and that the announcements’ proximity was mostly coincidental. It’s also worth noting that some folks at PCG believe I’m “out to get them” – which is not true. They keep getting themselves, and I’m just around to report it.

So that’s the end, right? Well, sort of. There are two historical pieces of information required for context. First, PCG and CalPERS did once engage in a quid pro quo arrangement related to a mandate: Back in 2000, CalPERS was considering PCG for a $500 million “Corporate Partners Program” mandate. But PCG, per its routine, had just experienced some personnel turnover related to firm economics/management control (Chris Bower has it, others want it). So CalPERS insisted that PCG restructure itself into some sort of official partnership, in order to reduce such friction in the future. PCG did so, and got the mandate (even if the restructuring was an abject failure).

Second: Multiple sources tell me that PCG had basically won these two new mandates back in September. Then came the defections of Monte Brem, Tara Blackburn and Steve Moseley — and CalPERS was in a bind. Either award the mandate to a PCG in-flux, or wait until things settle down a bit. They chose the latter.

So back to quid pro quo: Is it possible that CalPERS did in 2006/2007 exactly what it did in 2000, by requiring that PCG change its ownership structure before awarding mandates? Sure it’s possible, and it is certain that the management change was done to partially placate CalPERS (not to mention Oregon, Illinois Teachers, et. all).

But the only statements in play so far is that there was no quid pro quo between CalPERS and PCG this time, so we’ll have to chalk the skepticism up to past behavior – not to evidence (yet).