John Liu, New York City’s comptroller, isn’t doing private equity managers any favours.
Last week, PE Manager reported that Liu declined to disclose information on $32 million in fees the New York City Employees Retirement System (NYCERS) paid to private equity and real estate managers, including whether placement agents received any of the money.
He declined to disclose the information even after Bloomberg issued a Freedom of Information Act (FOIA) request, which some may find ironic given Liu, a Democrat, centred his 2009 candidacy on promising transparency.
Then again, it isn’t the first time he’s refused to disclose information pursuant to the investment programme. It was only last year that he dismissed six money managers for “poor performance” but refused to identify them all, even after several news organisations issued FOIAs. Under pressure from media organisations wielding the power of open records laws, Liu finally named the managers August 2010.
Such incidents make Liu’s administration look bad, but refusing to disclose information on fees paid to private equity managers this time around makes GPs look like they’re hiding something, thus guilty by association.
As of 31 May, New York’s pension system had $7.3 billion in private equity and $2.6 billion in real estate assets. Naturally, fees need to be paid on these investments. And if a portion of the fees were paid to placement agents, that’s allowed. In February 2010, Liu lifted a ban on placement agents interacting with New York City’s pension system. Of course, they had a number of rules to comply with, but in the end, placement agents were welcomed back to the New York City pension fold.
NYCERS and the private equity industry are still reeling from the then-New York Attorney General Andrew Cuomo’s pay-to-play investigation that left several public officials fined or sent to jail. Additional negative headlines now are not helpful.
As the sole trustee, investment advisor and custodian of New York City’s pension system, Liu, at times has focused on increasing transparency, including webcasting pension fund meetings. However, his inconsistency when it comes to disclosing information on the investment programme’s details isn’t just hurting his tenure, it’s unnecessarily casting private equity managers in a negative light.