US - The California Public Employees' Retirement System (CalPERS) has introduced a raft of governance measures following an investigation into the use of placement agents.
The Board of Administration approved a series of measures proposed by CalPERS staff to put in place recommendations set out in December by law firm Steptoe & Johnson, which conducted the review.
The recommendations addressed governance and operational matters at CalPERS, and in some cases will require changes in State law, the fund said.
"The actions we've taken today further strengthen our commitment to transparency, accountability and sound governance," said Rob Feckner, CalPERS Board president. "Our goal is to ensure that we live up to the highest principles as we work to shape our future and serve our members."
The Office of Audit Services will conduct periodic audits to ensure compliance with the new regulations and ensure none of the fund's money is directly or indirectly used to pay placement agent fees.
Meanwhile, the Investment Office will continue to review the fitness of external money managers who have used placement agents. Management and other fees will also continue to be reviewed by the Investment Office as part of the realignment effort.
CalPERS has already obtained $215m in fee concessions from a number of its external managers who have agreed not to use placement agents when seeking CalPERS business in the future.
The Investment Office will also examine protocols concerning outside consultants and staff with respect to current and potential investments. The special review recommended that outside consultants be permitted to fulfil 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.
"These are important measures that we will now implement," said CalPERS chief executive officer Anne Stausboll,. "They continue our efforts to restore the credibility and trust in CalPERS that our members and taxpayers deserve."
The Board has also asked CalPERS staff to analyse other recommendations arising from the review, including changing policies to restrict the receipt of gifts to Board members beyond limits imposed by State law, currently at $420; improving flexibility and speed in disciplining or terminating high level managerial employees compensated under Section 20098 of the California Code; and prohibiting Board members and employees from immediately going to work for a firm that had at least a $10m contract with CalPERS.
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