Pension System: Kentucky Retirement System
Assets Managed: $13.5 Billion (May 31, 2012)
Private Equity Assets: $1.5 Billion (11%)
Private Equity Target (Main Fund):10%
Chief Investment Officer: T.J. Carlson
In a sign that a degree of stability has returned to the $14 billion Kentucky Retirement System, William Thielen was named executive director after having served as interim director since April 2011 following the pension board’s vote to “terminate the service” of his predecessor, Robert Burnside.
In 2010 and 2011, KRS was rocked by three sudden departures, including Burnside, KRS Chairman Randy Overstreet, and Chief Investment Officer Adam Tosh, amid allegations of a pay-to-play scheme allegedly carried out by Tosh and a placement agent, Gen Sergeon. Tosh had reported to Burnside.
Upon his appointment, Thielen said in a statement that “KRS has faced numerous challenges over the past many months and still has many challenges ahead.”
Among those challenges is the continuing investigation by federal authorities into the alleged influence peddling at KRS despite a state auditor’s report that found “no evidence of a pay-to-play scheme…or of conflicts of interest that benefited KRS officials.” Nevertheless, the report did cite “several troubling aspects regarding the use of placement agents.”
What is not in dispute is that Sergeon received $6 million in placement fees for steering hundreds of millions of dollars to various hedge funds and private equity firms. The fees Sergeon earned were vastly larger than those earned by any other placement agent, and included a single $2 million payment for a $200 million placement with Arrowhawk Capital Partners’s Durable Alpha Fund.
Prior to their interactions at KRS, Sergeon and Tosh had done work together at the Pennsylvania State Employees’ Retirement System, a fact that wasn’t revealed to the KRS board until after the commitments were made with Sergeon’s assistance, according to the auditor’s report. Tosh resigned in 2010, just before KRS began looking into the matter. T.J. Carlson was named chief investment officer following Tosh’s departure and still serves in that role.
KRS has nearly $2 billion invested in private equity capital.
While serving as interim director, Thielen was also the system’s chief operating officer. Now that he has formally been named director, a search will start shortly for a new COO.
In an interview with Buyouts last October, Thielen said “we have a job to do here and everybody wants to do their job in a positive environment. We’ll be more than happy when this is all over.”