New Mexico Switches PE Advisers

The New Mexico State Investment Council has reversed an earlier decision to hire the StepStone Group, and instead decided at the end of March to hire rival LP Capital Advisors to manage the state’s $1.3 billion in private equity investments.

Naturally, LP Capital Advisors was pleasantly surprised by the reversal. Managing Director James Griffin said, “Our expectation was that StepStone had won the work,” and “we were the runner up.” StepStone has declined to comment.

Charles Wollman, the investment council’s chief information officer, did not offer a reason for the change, telling sister Web site peHub only that the state was “unable to reach a mutually satisfying agreement” with StepStone. In his words: “It was not to be.”

One reason for the switch, according to one peHub source, could be that StepStone’s former president, Steve Moseley, was previously a co-president at Pacific Corporate Group. PCG was named in a pay-to-play lawsuit involving the New York Common Retirement Fund, which was brought by former New York attorney general (and now governor) Andrew Cuomo. Moseley left StepStone in 2009 after that suit identified him for his dealings with former political consultant Henry Morris, who is now serving up to four years in prison for soliciting contributions from firms seeking to invest NYCRF’s money.

New Mexico is particularly sensitive to such issues. The state investment council is also embroiled in a pay-to-play scandal that is under investigation by federal authorities. In addition, former governor Bill Richardson has come under scrutiny for his role as chairman of the State Investment Board. As board chairman, Richardson was alleged to have steered some funds to managers whom he personally favored.

LP Capital Advisors does not manage money, and has not been mentioned in any pay-to-play investigations.

Based in Sacramento, the firm counts the California Public Employees’ Retirement System, the nation’s largest pension fund, as one of its key clients. Among the firm’s other clients are the Kansas Public Employees Retirement System and the New York Common Retirement Fund.

LP Capital Advisors expects to sign its contract with the state investment council shortly.

peHUB.com’s Jonathan Marino contributed to this report.