The approved measures put in place recommendations presented in December by Steptoe & Johnson LLP, the law firm conducting a special review of the placement issue. Those recommendations addressed governance and operational matters at CalPERS, and in some cases require changes in State law.
“The actions we’ve taken today further strengthen our commitment to transparency, accountability and sound governance,” said Rob Feckner, CalPERS Board President, in the news release. “Our goal is to ensure that we live up to the highest principles as we work to shape our future and serve our members.”
Among the actions the Board approved were:
- The Office of Audit Services will conduct periodic audits to ensure compliance with CalPERS policies and regulations that none of the fund’s money is directly or indirectly used to pay placement agent fees.
- The Investment Office will continue to review the fitness of external money managers who have used placement agents. .
- CalPERS already has obtained $215 million in fee concessions from a number of its external managers, with these managers agreeing not to use placement agents when seeking CalPERS business in the future.
- The Investment Office will examine protocols concerning outside consultants and staff with respect to current and potential investments. The special review recommended that outside consultants be permitted to fulfill only one of two roles – either offering opinions on the merits of an investment proposal or assisting in the monitoring of the investment once CalPERS makes it. The review also recommended that investment consultants be precluded from performing money management functions and a consulting role. The board asked the Investment Office to propose new policies or procedures to address the issue.
- The Investment Office will seek greater transparency from investment partners about the cost of advisory board and annual meetings. The Board also requested that, in the case of sole accounts, CalPERS staff require external money managers to hold business meetings at either their offices or at CalPERS.