When New York City Comptroller John C. Liu wanted to revise rules governing the role of private equity placement-agent relationships with the city's five pension plans, the logical point man — a person with extensive private equity experience — was the new chief investment officer, Lawrence M. Schloss.
"John said, 'This is right up your alley. Why don't you take the lead on this?'" Mr. Schloss said in an interview.
Mr. Schloss joined Mr. Liu's staff Jan. 19 after having been chairman, chief executive and co-founder of private equity firm Diamond Castle. “I know the placement agent business as well as anyone,” Mr. Schloss said. “I have negotiated partnership agreements, so I know how this works.”
Mr. Liu unveiled proposals Feb. 18 to ease restrictions of placement agents doing business with city pension plans. He recommended that a ban on placement agents be replaced with rules that “allow legitimate placement agents who provide value-added services.”
Mr. Liu is the investment adviser and custodian of the five city pension plans, which had a total of $98 billion in assets as of Jan. 31. He was elected comptroller in November, replacing William C. Thompson Jr., who ran an unsuccessful campaign against Michael Bloomberg for New York mayor.
Several policy changes, some of which, such as a prohibition on gifts from fund managers to comptroller's office employees, took effect immediately. But proposals affecting placement agents and third-party marketers will require approval by the city's various pension boards, and Mr. Liu credited Mr. Schloss with “formulating these changes.”
In the interview, Mr. Schloss said the comptroller's legal staff had been looking into “the evolving rules on placement agents” soon after city and state pension boards suspended dealing with the agents. Last year, both New York City and New York state pension funds banned the use of placement agents after state Attorney General Andrew Cuomo issued a code of conduct as part of his investigation into alleged “pay-to-play” political influence on the state's pension fund investments.
Mr. Schloss said the key elements to New York City's proposed rules include making sure placement agents have a track record and that placement agents that failed to follow the city's guidelines can be dropped.
“We want to define a legitimate placement agent,” Mr. Schloss said.