The $83.1 billion North Carolina Retirement Systems, after three years of study, has banned eight money managers it works with from using placement agents, negotiated lower fees with others and is moving toward having placement agents register as lobbyists.
The system is changing its relationship with placement agents — as have other states in recent years. Revisiting the ethics involved in using agents “is increasingly a trend that we see” with other public pension plans, said attorney Suzanne Dugan, an ethics adviser to the North Carolina fund.
Ms. Dugan, who leads the ethics and fiduciary counseling practice at Cohen Milstein Sellers & Toll PLLC in Washington, said public fund administrators and boards “are being proactive instead of responding to problems,” which is particularly important for smaller funds with limited resources.
“They really have to get out in front,” she said.
On Dec. 16, North Carolina Treasurer Janet Cowell, sole trustee of the pension fund, announced the conclusion of a multiyear review of placement practices and the beginning of wholesale reforms. The review, conducted by the North Carolina Department of Justice and outside counsel Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC, a Washington law firm, led to policy changes for investment managers working with agents, including bans on gifts or charitable donations made on behalf of NCRS employees and bans on political contributions to the treasurer or candidates for the office.
Also as a result of the review, use of placement agents was banned for money managers Angelo, Gordon & Co.; Apollo Global Management; Horsley Bridge Partners; Robeco Institutional Asset Management; and StarVest Partners. The firms, which all now manage assets for North Carolina, either used placement agents or had relationships with agents that helped obtain business with North Carolina. The firms, which all cooperated voluntarily in the review, were singled out for a variety of lapses, including not disclosing personal relationships and not disclosing gifts or political and charitable contributions.