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NYC adds four to PE program, even as report shows underperformance

The New York City Retirement System has hired Eneasz Kadziela to replace veteran private equity officer James Del Gaudio, who left in March, according to Eric Sumberg, a spokesman for the city comptroller’s office. Kadziela is one of four professionals to recently join the private markets team, which a report suggests has been falling short of its benchmark.

Kadziela joined the system in March as a private equity investment officer working under Head of Private Equity Alex Doñé. We weren’t able to identify the additional three people joining Kadziela and Doñé or learn if they were internal hires or brought in from the outside.

Prior to joining New York City Retirement System, Kadziela worked as director of research and fund relations for the Small Business Investor Alliance, a trade group of lower-mid-market mezzanine and buyout shops that he joined in 2012. Prior to SBIA, he worked as an equity research analyst at Cross Research Group.

The retirement system’s private equity team has been gradually depleted. Del Gaudio left in March to join the Pennsylvania Public School Employees’ Retirement System as a senior investment professional. Earlier the NYC system lost private equity veterans Rafique DeCastro, Elizabeth Caldas and former head of the asset class Barry Miller. Doñé took over the program in November.

Questions linger over the direction of the city’s private equity program. Comptroller Scott Stringer, who has authority over the system (each of the city’s five pension funds also have governing boards), has criticized the amount of fees the system has paid to outside managers.

In a report issued earlier this month Stringer said the performance of both private and public asset classes fell short of benchmarks after accounting for fees. Managers of private asset classes like private equity, hedge funds and real estate, fell $2.6 billion short of their target benchmarks after fees over 10 years, the report said.

“The report addressed the general need for transparency on the impact of fees on performance,” Sumberg said. “The Comptroller is in conversation with his fellow trustees to determine the best ways to move forward.”

Pension reform has been a hot topic with city officials in the past, but has yet to lead anywhere, according to one person familiar with the retirement system’s thinking. Former Comptroller John Liu and former Mayor Michael Bloomberg proposed consolidating the five pensions under one staff and one governing board, and bringing more investment management in-house. That plan stalled after unions opposed it.

For private equity, the report “could foreshadow a significant secondary sale to downsize expensive asset classes like PE,” the person said. Sumberg didn’t answer a question about a potential secondary sale. New York City sold almost $1 billion of its private equity portfolio in 2012, under the leadership of former Chief Investment Officer Larry Schloss.

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