By Kris Hundley, co-author of periods
In print: Thursday 7 October 2010
Public pensions of Florida has invested approximately $ 2 billion in two dozen private funds since December.
Rather than a personal approach of the Board directly, half of the funds used intermediaries to obtain the port. These agents have paid placement ben million dollars to make introductions and setting up meetings. Media finder fee: approx. 1.5 million.
Fund managers of Florida at the Board say through agents of positioning is cause for concern and routine. But after these intermediaries were found to be at the core of public pensions Kickback scandal in New York and California, have taken more stringent stand.
New York State pension has banned the use of placement agents. California has put limits on their remuneration and compensation plans to send them on the website of the State pension.
And just last week, in the wake of the problems to public pension funds, the Securities and Exchange Commission started requiring registration of placement agents.
Ashbel c. Williams, Jr., Executive Director of the SBA, boasted that the rules of Florida are even more stringent. He said Investment Advisory Council of his Agency last week: "our policy goes beyond the SEC we need disclosure of the compensation you paid."
There's only one catch: Williams ' definition of disclosure does not extend to retirees or the taxpayers of Florida. His agency you get to know what brokers are paid. But the public — said that retirement investments are made on merit, not about who you know — unable to discover how much money has changed hands before a deal went down.
The reason? SBA does not release information if investment fund wants to keep it secret. And all they do.
For example, Florida recently invested $ 100 million of pension funds with GSO Capital Partners. The company said reveal what is paid a placement agent would "give our efforts business."
Baloney, says Christopher Tobe, a veteran of financial advisor and trustee of Provident Fund of Kentucky. Tobe is among the growing number of experts say funds that third parties to use, rather than going directly to a pension plan, are perpetuating a useless and poorly regulated system that proved vulnerable to abuse.
"It is blatant corruption," he said. "There's really no reason to employment agencies, unless you want to get money to someone through the back door."
For some months last spring, SBA does give fund managers the positioning option agent pays by the public records of requests for exemption. In seven bids where taxes were communicated, placement agents received a total of approximately $ 12 million, approximately 1.5% of total investment of Florida of 825 million.
The Commission reported lower $ 250,000 was paid by Energy Capital Partners, a private equity firms, to Group Hill Park for "schedule meetings." Florida invested $ 100 million with Energy Capital Partners.
P2 Capital Partners, meanwhile, got the same result — a pledge of 100 million US dollars — but paid his placement agent, C.P. Eaton, 3.65 million. Eaton Duties? "Establish relations LP (limited partner)".
Knight Vinke signed an agreement of 250 million dollars with Florida and paid his placement agent, XT Capital Partners, up to 1.25 million dollars for the services which is described as "strictly Ministerial".
Because some funds did feel the need to pay a third party for execution of interference with the State, while the rest are landed at approximately the same investment total without extra costs?
"Perhaps were not as attractive a Fund," said Tobe, the trustee Board of Kentucky. "They had to have some extra juice."
Girard Miller, a former member of Governmental Accounting Standards Board and veteran Fund Manager, remember that pensions as Florida already pay millions of dollars of independent consultants to screen potential investments.
"So why on Earth is required for legitimate investment advisers and a sectoral pension fund responsible for hiring a mercenary?" Miller asked in a column in Governing magazine last year.
Florida typically pay a fund 1 to 2% to manage its investment, so that a deal of 100 million dollars could mean that more than 2 million to the Fund Manager. Placement agent Commission is generally taken by the management costs.
Williams, Executive Director of the SBA, said the fact that the fund managers pay placement agents mean that cost nothing public.
But Susan Lerner, head of common cause of New York said that taxpayers end up paying the price. "The funds that use these brokers negotiate a fare management a little higher so that nothing comes out of their profit margin," he said.
"Taxes get passed. The audience is paying for it. "
Miller, who was involved in both sales and purchase of funds placement agents called "a gross cost of the investment industry".
"Having sitting on both sides of the table to final presentations for 25 years, '' he wrote," I can tell you that there's really no added value to marketing analytical process that cannot be delivered by players keys. "
Recently blew the whistle on Tobe Fund of Kentucky, when he learned that placement agents is paid $ 15 million in taxes since 2004 after years of denying that and used such intermediaries. In response to its allegations, the SEC has opened an informal inquiry into Kentucky last month.
Tobe and Miller suggests that if placement agents are used, their fees should be reduced to approximately 200,000 dollars. Miller "that still rewards a marketing expert to present the benefits of an investment product for a large Fund," he wrote.
In New York, Deputy Comptroller and different placement agents and guilty of fund managers for performance of a system of remuneration-play at the public Board. The pension has recovered more than 120 million dollars from parties accused of wrongdoing.
In California, a former Board Member CalPERS shot placement agent is accused of taking more than 50 million u.s. dollars of funds in exchange for management for retirement. CalPERS now encourages funds to submit their proposals online.
"There is no reason for them to pay someone to call or to set a meeting," Chief Investment Officer CalPERS Joseph Dear said in June. "Our door is open."
Kris Hundley can be reached at khundley@sptimes.com or (727) 892-2996.
[Last update: 07 October 2010 04: 00 PM]
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