CalPERS should severely penalize money managers who do not disclose fees they’ve paid to placement agents to get business from the plan, the $196.6 billion system’s investment consultant is recommending.
Wilshire is suggesting that the California Public Employees’ Retirement System, Sacramento, set an unspecified dollar penalty for external managers, tied to the value of the portfolio, according to agenda materials for the system’s Nov. 16 board meeting. All fees paid over the lifetime of the relationship would also have to be returned, plus CalPERS would be allowed a penalty-free withdrawal from the portfolio, under the Wilshire plan.
The recommendation will be considered by the system’s board on Nov. 16, when it is expected to implement new ethics rules. The pension plan, the SEC and attorneys general in California and New York are conducting investigations of money manager fees paid to placement agents who help external money managers solicit CalPERS business.
In another recommendation, another consultant, Pension Consulting Alliance, is suggesting that an existing CalPERS rule requiring board members to disclose gifts from placement agents be expanded to include pension fund staff and external consultants.
Separately, CalPERS at its Dec. 14 board meeting will consider issuing an RFP for a lead general investment consultant. The contract of Wilshire, which has been lead consultant since 1983, expires June 30, 2010. The firm is expected to rebid. CalPERS officials want a consultant in place by July 1, 2010.
CalPERS has budgeted $2.86 million per year for the contract.