All five of New York City’s pension funds have approved a ban on placement agents across all investment classes, according to a statement from city comptroller Scott Stringer.
The newly enacted ban is part of a six-point reform package for the operations of the comptroller’s asset management office and the pension funds introduced by comptroller Stringer in January. The six-point plan is designed to enforce stricter compliance across all types of investments and on all investment officials.
“Ending the involvement of intermediaries in pension funds’ transactions will ensure that the integrity and independence of our investment decisions are beyond reproach and without conflict,” Stringer said in the statement.
New York City has a history of pay-for-play investment scandals involving placement fees. Two top aides to former city comptroller Alan Hevesi were convicted of violating pay-for-play rules after making millions in placement fees and spreading them around to party cohorts. Hevesi himself ended up in jail in 2011 as part of the kickback dragnet.
“The passage of an ironclad ban on placement agents for all transactions involving the New York City Pension Funds was long overdue,” Stringer said in the statement.
Stringer became comptroller at the beginning of the year, after Larry Schloss stepped down from the position in October 2013. Last year, the comptroller’s office also lost its head of private equity, Barry Miller, to private equity and real estate firm Landmark Partners.
New York City has historically been active in offloading its private equity portfolio via the secondaries market. In mid-2012, the pension system sold nearly $1 billion worth of private equity fund interests with managers such as Clayton Dubilier & Rice, Silver Lake Partners and Thomas H Lee Partners. The pension sold its stakes in an effort to reduce the number of fund managers in its portfolio. UBS led the sale.
The New York City pension funds have approximately $150 billion in assets as of 31 May.
Reporting by Bailey McCann.