CalPERS officials are examining how “certain internal procedures and protocols” were not followed regarding the contract renewal of the fund's two hedge fund consultants, confirmed Brad Pacheco, a spokesman for the pension fund.
UBS Alternative & Quantitative Investments, Chicago, and Pacific Alternative Asset Management Co. LLC, Irvine, Calif. — whose contracts expired in 2007 — were paid a total of $36 million during the two-year period since then, he said.
Kurt Silberstein, senior portfolio manager, global equities, who oversees the fund's $5.7 billion hedge fund portfolio, was recently placed on a brief leave of absence in connection with the system's internal investigation, said sources who asked not to be identified.
Mr. Silberstein now is back at work and when reached at his office, referred inquiries to Mr. Pacheco. Mr. Pacheco said he could not comment on personnel matters.
Both UBS Alternative and PAAMCO were hired in 2003 to advise investment staff of the $202 billion California Public Employees' Retirement System, Sacramento, on manager selection and to perform due diligence for the fund's hedge fund portfolio, known internally as risk managed absolute return strategies. Mr. Pacheco said the firms continued to provide satisfactory service to the fund from 2007 to 2009.
“This is clearly an administrative oversight, which we are working to rectify as soon as possible. We have continued to perform our duties under the terms of the contract, which amounts to $100,000 a year,” Jane Buchan, PAAMCO's CEO, said in an interview.
Kris Kagel, a UBS spokesman, declined to comment.
The fact that UBS and PAAMCO were working without a contract was uncovered while renegotiating the terms of all of the fund's relationships with hedge fund and hedge funds-of-funds managers. The renegotiation was part of a move to separately managed accounts and to secure better fees and other investment terms, said Mr. Pacheco.