CalPERS to Examine Fees Paid to Adviser

October 14, 2009 ( - The nation's largest public pension fund said it is launching a "special review" of fees paid by some of its money managers to an investment advisory firm run by one of its former board members.

The Wall Street Journal reports that the California Public Employees Retirement System (CalPERS) said in a press release, “The review was sparked by the recent receipt of information provided to CalPERS by investment funds that reported their payment of more than $50 million in fees over a five-year period to Arvco Financial Ventures LLC, a placement agent firm headed by former CalPERS board member Al Villalobos.” In May, the pension fund adopted a new policy calling for external managers to disclose fees and other information about the placement agents it hires to seek CalPERS asset management business (see CalPERS Adds Placement Agent Disclosure Policy ).

Calpers documents show some of CalPERS’ poorly performing investments were recommended to the pension fund by Arvco, the news report said. The review will be conducted by the law firm Steptoe & Johnson LLP.

Timing of the CalPERS announcement corresponds with the signing by Governor Arnold Schwarzenegger of a new bill that requires disclosure of fees paid by investment firms to placement agents (see Schwarzenegger Signs Law on Placement Agents ).

The increased scrutiny on fees to placement agents began with a probe in New York (see Cuomo Announces Guilty Pleas in Pay-to-play Probe ) which rippled into other states (see California AG Steps Up Pension Corruption Investigation ).