CalPERS documents show ARVCO collected most fees

Documents also reveal Quadrangle paid a fee to UBS for the successful outcome of an LP vote to preserve the investment period on its latest fund after a key-man clause was triggered.

ARVCO Financial Ventures, a placement firm run by a former board member of the California Public Employees’ Retirement System, has received far more in fees from the pension than any other placement agent.

ARVCO, run by Alfred Villalobos, has received more than $58 million in fees from fund managers for work on securing commitments from CalPERS. That’s according to more than 600 placement agent disclosures the pension released Thursday as part of its review of placement agents’ interaction with CalPERS that start last spring.

The amount ARVCO has made dwarfs every other placement agent that has solicited investments for fund managers from the pension. A little-known New York firm called Tulling, which made the second highest amount, collected about $17 million. Donald, Lufkin & Jenrette made about $12 million and Credit Suisse collected about $11 million.

In light of recent questions raised about placement agents, we are working aggressively to take measures to provide transparency, adopt thoughtful reforms and restore trust in our system.

Anne Stausboll

The pension released the documents in response to open record requests from the Wall Street Journal and other news outlets. The disclosures were obtained voluntarily from more than 90 percent of the fund managers that work with the pension in response to new CalPERS’ policies on disclosure of placement agent activity. The pension has not released the names of the firms that did not comply with the disclosure request.

The disclosures for the most part relate to new investment proposals since May 2009, when CalPERS’ policy was enacted. But some firms voluntarily disclosed information provided by managers with ongoing commitments to pay placement agents for existing investments.

Some firms, like billionaire Ron Burkle’s investment firm Yucaipa, voluntarily disclosed information about past payments. Yucaipa, for example, paid Wetherly Capital, a placement firm, 1 percent on a $200 million commitment the firm received from CalPERS in 2001.

“We think it is important to recall that a substantial due diligence was performed on Yucaipa not only by CalPERS’ [alternative investment] staff, but also a full review and ranking was performed on Yucaipa by McKenzie Consulting … and Yucaipa’s YCI fund was ranked [number one] from amongst a large group of candidate funds,” the firm said in its disclosure letter.

Other interesting facts come to light in the disclosures. The Quadrangle Group, for example, outlines a key-man event that took place when founder Steve Rattner left the firm in early 2009 to join the administration of US President Barack Obama. The firm’s LPs had the option to terminate the investment period after the key-man clause was triggered.

Quadrangle paid fees to one of its employees, Ivan Nedds, and certain employees with UBS, to help make sure the LPs voted to preserve the commitment period. Nedds was paid $250,000 for “the successful outcome of the Key Man Election”. UBS, out of a $1 million fee, was paid $250,000 based on the successful outcome of the election.

TPG revealed in the documents that it has a broker-dealer affiliate, TPG Capital BD, that solicits investors for commitments.

CalPERS has been undertaking a “special review” of placement agent activity related to the pension’s investments. “Gathering information is not enough. We remain firmly committed to pursuing a full and fair examination that the special review will provide,” according to Anne Stausboll, the pension’s chief executive officer.

“In light of recent questions raised about placement agents, we are working aggressively to take measures to provide transparency, adopt thoughtful reforms and restore trust in our system,” she said in a statement.