Atlanta pension fund's first steps into alternatives not easy

Atlanta City Hall
Atlanta City Hall

Last year's passage of legislation in Georgia allowing most public pension funds in the state to invest in alternatives has led to complications for the Atlanta General Employees Pension Fund.

Trustee Angela Green filed a complaint with the Securities and Exchange Commission earlier this year, arguing the $1 billion pension fund's investment consultant, Gray & Co., did not adequately reveal to the board that it was the manager of a private equity fund called “Gray Co Core Alts II,” according to recently released board meeting minutes from March 6.

The pension fund's board originally approved a commitment to what was referred to in the Nov. 7 meeting minutes as “Core Alts II” for up to $28 million.

It was the first commitment to alternatives for the pension fund since the signing of the law last April by Gov. Nathan Deal. The law, which was effective on July 1, 2012, allowed public retirement systems — excluding the $48.1 billion Georgia Teachers' Retirement System, Atlanta — to “invest retirement system assets in certain types of alternative investments, private placements and other private investments.”

At the Dec. 5 meeting, Alfred Berry Jr., chairman of the board of trustees, “expressed his desire to change his Nov. 7 meeting vote authorizing an investment in the Gray Co. Core Alts II private equity partnership because he believed that the sponsorship by Gray & Co. had not been adequately disclosed,” according to meeting minutes.

A vote to reconsider the November vote did not pass.

According to the recently released March 6 board meeting minutes, the board passed a resolution regarding the complaint filed on Jan. 18 by Ms. Green to the SEC, stating the complaint was “undertaken in her capacity as an individual and (was) not on behalf of the board of trustees.”

Yolanda Waggoner-Foreman, chief administrative officer at Gray & Co., said the name of the private equity fund of funds to which the pension fund committed money is GrayCo Alternative Partners II. Ms. Waggoner-Foreman said the pension fund did sign the limited partnership agreement for the fund of funds. She wouldn't comment further.

Mr. Berry and Ms. Green did not return phone calls by press time.

The board attempted another alternatives commitment in December as well, voting to hire Loop Capital Investment Management as part of its emerging manager allocation to run $10 million in a private equity fund of funds.

However, the board was informed at its Feb. 6 meeting that Loop Capital decided to suspend fundraising and the board asked Gray & Co. to move ahead to find a replacement.

The pension fund's board also has been plagued by delays in its search for an investment consultant.

Gray & Co's contract expired on Dec. 31, 2010, but the firm continued to act as consultant pending a request for proposals and search by the pension fund.

The decision to issue an RFP was announced in January 2012, but the request was not issued until October.

But at the Jan. 9 board meeting, Kristin Denius of the city law department said the RFP would need to be reissued since there was wording in the RFP “that asked for responses on a different set of services not intended to be included.” Mr. Berry confirmed in a telephone interview on Feb. 6 that the RFP would be reissued.

As of April 17, there is no word as to when the RFP will be reissued.