US - The Missouri State Employees Retirement System (MOSERS) has become the first public pension fund to comment against the Securities & Exchange Commission's proposal to ban the use of placement agents.
In a recently released comment letter to the SEC, MOSERS chief investment officer Rick Dahl said: "Prohibiting legitimate placement agents from working with public pension funds is an extreme measure that will have unintended consequences; that is, it will reduce our ability to access some of the best managers throughout the world and ultimately result in lower investment returns for our members."
In July, the SEC proposed rules to curtail pay-to-play practices at government pension funds. The agency recommended banning the use of third party marketers and other placement agents altogether to solicit a government client.
The proposal also prevented managers and marketers from making political contributions.
In his letter, Dahl championed the role of placement agents in connecting MOSERS with smaller managers.
He said: "It is our view that some of the best investment opportunities are with smaller firms that have spun out from larger organizations or are raising institutional capital for the first time. Typically, small firms do not have the internal resources to effectively market their funds on a global basis.
"If placement agents are prohibited from being paid by investment managers for facilitating the investment process on behalf of public pension funds, MOSERS will have a more arduous and costly process accessing the best global investment opportunities."
He said placement agents have helped MOSERS access pre-screened general partners, arranged due diligence meetings, provided performance-related data and facilitated the closing process, among other things.
According to the SEC website, the agency has received 20 letters from members of the investment community, including endowments, money managers and third party marketers, among others.
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