NEPC, a consultant to the $7.5 billion New Mexico Educational Retirement Board, is conducting a review of the 20 private equity pledges made via the limited partner’s former private equity consultant,
NEPC, which in July took over management of the New Mexico private equity program with a six-month contract, plans to issue a report detailing results of its review in December, said pension fund CIO Bob Jacksha. Among the funds recommended by Aldus Equity Partners during its tenure as consultant are
A decade ago, several private equity firms involved in a similar pay-to-pay scandal in Connecticut ended up returning money to the state, or reducing the size of the state’s commitments, including The
New Mexico Educational Retirement Board CIO Jacksha believes Meyer’s cooperation with authorities in the ongoing investigation is a positive development because it will help resolve the situation more quickly. “He has now admitted that he withheld information from us and misled us,” Jacksha told Buyouts. “The politically connected individuals in New Mexico were not ERB staff,” he added. “Staff acted in a proper manner and worked with Aldus to try to get proper disclosure. We were thwarted in that they withheld information or gave us wrong information.”
Jacksha added that just because Meyer recommended a commitment does not mean that the pension fund acted on that recommendation. In fact, the board rejected about 10 of Aldus Equity’s recommendations for various reasons. One had gone through the approval process, but the terms were not satisfactory; with others, the staff didn’t like the investment proposition. Jacksha did not know what the legal ramifications would be if any of the 20 Aldus Equity-led pledges turn out to be some of the investments that Meyer referred to as “not necessarily in the best economic interest of New Mexico,” because they have already signed limited partnership agreements for those pledges.
The $12 billion New Mexico State Investment Council, meantime, had used Aldus Equity Partners as its private equity consultant until April, when the governor ordered ties with the adviser cut. Former state investment officer Gary Bland, in an interview the day before his resignation on Oct. 21, told Buyouts, “I understand the serious issues raised by the NY investigation and why they raise concerns.” However, three separate agencies are investigating the issues as they relate to New Mexico, and an independent performance review is now under way, so “it might be wise to wait for results and not rush to judgment,” said Bland.
Bland noted that the investment office staff, the private equity investment advisory committee and state investment council all reviewed Aldus Equity’s recommendations, which, for various reasons and on several occasions, were rejected. Though many of the investments that were made are still in the J-curve, explained Bland, the private equity portfolio so far has achieved above-average returns versus the sector’s benchmarks. Additional assessment of individual funds and agreements is ongoing, and “as potential litigation issues are in play,” said Bland, he felt it was inappropriate to comment on the status of any specific fund.
Over at the $200 billion CalPERS, it’s not yet clear how the nation’s largest pension fund will handle private equity pledges recently discovered to be problematic. Although not a client of Aldus Equity, CalPERS is looking at payments of more than $50 million made between 2003 and 2008 to ARVCO Financial Ventures LLC, a firm headed by former CalPERS board member Al Villalobos, who served on the pension fund’s board between 1993 and 1995.
“We’re not commenting on what we may or may not do about private equity commitments,” said CalPERS spokesperson Clark McKinley. “Of course fees paid to placement agents aren’t in question since CalPERS didn’t pay the fees. In such cases, we always consider our options, keeping in mind the best interest of our investment program and CalPERS members,” he added.
At the New York State Common Retirement Fund, as of July Carlyle Group,