Pension access

The news spotlight recently has been trained on Apollo Global Management’s use of a former board member of the California Public Employees’ Retirement System to solicit investments from the pension.

A similar story has emerged in North Carolina.

CalPERS is performing an internal review sparked by the revelation that investment firms, including Apollo, paid a total of some $50 million to Al Villalobos’ placement agency, ARVCO Financial Ventures, over five years.

For some, the fees to ARVCO are somewhat puzzling given that CalPERS owns a 10 percent stake in Apollo, giving the pension a built-in reason to commit big to the firm’s many funds.

Apollo hired ARVCO for several assignments to help secure investments from various US pensions, but

Christopher Witkowsky

CalPERS loomed largest. In fact, some of the contracts between Apollo and ARVCO specify work only related to CalPERS.

In one example, Villalobos entered a contract with Apollo in 2008 to solicit investments from CalPERS for Apollo European Principal Finance Fund, which invests in non-performing loans. Under the agreement, Apollo would pay Villalobos a placement fee equal to 1 percent of the first $100 million of CalPERS commitment to the investment and 0.5 percent for any capital raised in excess of this threshold, according to the documents.

CalPERS committed €49.4 million to the fund and CalPERS agreed to pay ARVCO €494,000, according to pension documents.

Over the duration of his time working for Apollo, Villalobos was wildly successful at his job, eventually collecting more than $3 billion for Apollo and netting roughly $40 million in fees.

Apollo has not been accused of wrongdoing; nor has ARVCO.

California isn’t the only state where a pension-specific specialist was employed by Apollo. In 2005, the North Carolina Retirement System invested $150 million in Apollo’s sixth buyout fund, which eventually closed on $10.1 billion. Apollo used placement agent Avid Partners to help secure the investment from North Carolina.

Avid Partners is run by Pamela Joyner, who was a friend of the North Carolina chief investment officer at the time, Patricia Gerrick. Gerrick admitted her friendship with Joyner to a local television station in North Carolina, but said she had fully disclosed the personal relationship.

“My relationship with Pam helped me get access to a very good investment for North Carolina,” Gerrick told WRAL News in an interview earlier this month. Gerrick did not specify in the comments which investment Joyner had helped her pension access in this case.

Gerrick was fired in September by North Carolina treasurer Janet Cowell for undisclosed reasons.

In the wake of the firing, Treasurer Cowell instituted a series of reforms to “increase transparency and strengthen oversight” for the pension. The reforms include a prohibition on the treasurer, senior executive staff and key investment division staff from doing business with former colleagues at the Treasurer’s department for two years after the colleagues’ departures. Also, the reforms force external managers to disclose the retention of placement agents, fees paid to them and whether the agent is registered with the SEC or the Financial Industry Regulatory Authority.

Cowell is requesting that the pension’s existing external mangers disclose the past use of placement agents.