Updated with correction
New Jersey Division of Investment, Trenton, will require that placement agents assisting in money manager selection meet new “minimum standards,” including the disclosure of all fee arrangements.
“After a discussion and review of related actions by industry groups and other public pension funds, the (division's) Investment Policy Committee preferred to adopt additional standards with respect to transparency and qualifications in lieu of an outright ban on placement agents,” , according to a July 2 memo sent by William Clark, director, to the state investment council, obtained by P&I Daily.
On July 9, the State Investment Council voted to approve the added disclosure language, according to Thomas Vincz, a spokesman for the division.
Among the requirements, placement agents must be registered with an appropriate regulatory body (SEC, FINRA and/or state regulators); the agent firm's executives should be licensed by state and federal regulators; and the agent's supervisory personnel should have at least three years of experience in the securities industry.
“We believe that New Jersey's policy pertaining to political contributions by investment firms and their placement agents remains the toughest in the nation,” Mr. Clark wrote. “Given the alleged abuses concerning the use of placement agents in New York and elsewhere, however, this memorandum presents additional policy options for the council to consider.“
Mr. Clark wrote that an advantage of adopting these guidelines is that it allows the division to continue to invest in smaller funds that use placement agents. A disadvantage, he wrote, is that it “imposes significant administrative burdens on division staff, and it provides somewhat less of a check against inappropriate marketing practices than an outright placement agent ban.”
Separately, the division's pension assets totaled $62.9 billion as of May 31, the end of its fiscal year. That's down 19.6% from a year earlier.
Mr. Vincz said the decrease is “misleading” because the most recent performance information is preliminary. “Director Clark said he expects that (fiscal) year-end performance will be in the -14% to -15% range, which he expects will land New Jersey among the top-performing public funds in the country in this market,” Mr. Vincz wrote in an e-mail.