CalPERS places spotlight on placement

CalPERS has just released some more than 600 documents totaling over 5000 pages relating to previous dealings with placement agents. These included a sheaf of voluntary disclosures by around 90% of all CalPERS-invested GPs on whether they used such agents, and a table of the ten best-compensated agents who had sourced its commitments.

“We are working aggressively to take measures to provide transparency, adopt thoughtful reforms, and restore trust in our system,” said Anne Stausboll, CalPERS CEO, said in a release accompanying the documents. And the resulting data includes some interesting sidelights on fundraising by firms in Asia Pacific – including who used agents and who did not.

For instance, according to the disclosure from Australia’s Ironbridge Capital, signed by Ironbridge Managing Partner Paul Evans, “Crane Capital Associates was used by us as a placement agent for our Fund 2 raising in 2006 … We paid Crane a fee of A$3.094,169 [$2.89 million] for assistance with raising our 2006 Fund II,” the disclosure goes on to state. “Part of this fee was directed to a second placement agent in Japan called Chikusei where a key former Crane employee worked.” Following Ironbridge’s instructions, Crane did not seek to contact existing LPs to canvass its new fund, but Crane did receive some A$235,746 ($218,418) relating to CalPERS’s support for Ironbridge Fund II, as its renumeration was based on the total amount raised for the fund. Ironbridge Fund II closed at A$1.05 billion ($973 million).

Leading mid-market and China-exposed global investment firm The Jordan Company disclosed that it had contracted Credit Suisse as its exclusive placement agent for its The Resolute Fund II, which closed in December 2007 at $3.6 billion, for: “a fee equal to 0.5% of the aggregate principal amount of limited partnership interests in The Resolute Fund II, L.P. sold to investors.” Although the fund closed with a CalPERS commitment, The Jordan Company indicated that CS’s support was mostly advisory.

Lombard Asia III, invested by CalPERS, indicated that it had not used a placement agent for the investment, although it had engaged Liberty Global Capital Services as an advisor in unrelated contexts and engaged Japan Venture Partners as a placement agent purely for Japanese LPs. Affinity Equity Partners stated simply that it had not used a placement agent in connection with CalPERS.

Two other leading VC investors in Asia, Lightspeed Venture Partners and New Enterprise Associates, also both stated in their disclosures that they had not used placement agents in connection with investments by CalPERS.

Only one firm known as a leading placement agent for Asia Pacific funds, Denning & Co., made it into the top ten list of CalPERS placement agent beneficiaries by value, having received $3 million in compensation for securing investments from CalPERS. However, M3 Capital Partners, a New York-based agent, received just over $3.13 million in return for securing a CalPERS commitment to an Asian real estate fund in 2005, according to George Ahl, a principal at M3. In comparison, Arvco Financial Ventures, the controversial placement agency started by former CalPERS board member Al Villalobos, topped the list for compensation, receiving $58.9 million.

There is nothing here to suggest that any Asia-conversant placement agent, or GP, was at all implicated in any supposed wrongdoing around CalPERS’s relationships with middlemen and advisors. But the public pressure for disclosure and transparency resulting from the scandals in New York, California and elsewhere across America is certainly casting a strong light on many aspects of the industry.

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• Topics
• LPs
• Fundraising
• Regulation
• North America
• Paul Evans
• Affinity Equity Partners
• Ironbridge Capital
• Lombard Investments
• New Enterprise Associates
• The Jordan Company
• California Public Employees' Retirement System (CalPERS)