A multiyear review of placement agent practices for the $83.1 billion North Carolina Retirement Systems, Raleigh, has led to a rigorous new placement agent policy and roughly $15 million in refunds and fee discounts from eight investment managers. North Carolina officials discussed the changes Monday during a meeting of the system’s investment advisory committee.
Avista Capital Holdings agreed to replace or discount fees totaling $4.2 million, while EARNEST Partners agreed to rebate $660,000 in fees. Longview Partners agreed to $10 million in refunds, payable $500,000 per quarter for five years, starting in the fourth quarter of 2013.
The placement agent review, conducted by the North Carolina Department of Justice and outside counsel, also led to policy changes at Angelo, Gordon; Apollo Global Management; Horsley Bridge Partners; Robeco Institutional Asset Management; and StarVest Partners. CB Richard Ellis declined to reach an agreement with the fund on policy changes.
“Clearly there were potential conflicts of interest and undue influence between 2002 and 2008,” State Treasurer Janet Cowell, who became sole trustee of the pension fund in 2009, said in an interview. “It was very clear that we needed to address those potential issues and tighten up our process.”
The review, which was conducted without subpoena power, evaluated the severity of questionable practices, investment managers’ strategy and performance, focusing on fund commitments made between 2002 and 2008.
“At the end of the day I don’t believe that the pension fund was materially harmed,” said Ms. Cowell. “Those firms obviously had a commitment to a long-term relationship with North Carolina.”
NCRS officials agreed to consider further legislative changes recommended in the review, including having placement agents register as lobbyists, and also agreed to establishing a fiduciary investment committee. “This new set of reforms will really put us at the forefront,” Ms. Cowell said.