Comment: Chris Sullivan
The hedge fund industry has always had a bit of a schizophrenic relationship with the media, particularly here in the US
21/10/2009
Pensions continue to use third-party firms
Hedge fund marketing companies are confident that ongoing concerns over the US ‘pay to play’ ethics scandal, will not impact their businesses, despite a new wave of pension funds reviewing their relationship with placement agents.
Last week, the US’s largest public-pension fund, Calpers, revealed that a former board member had accepted over $50m in fees for arranging investments, triggering a number of US pension funds – including the Santa Barbara County Employees’ Retirement System – to tighten their policies regarding the use of placement agents and third-party marketers.
Despite this, investors are not completely discontinuing the use of third-party marketers, says Don Steinbrugge of Agecroft Partners.
“Besides the obvious restrictions, such as New York State, not only have we not seen any effects of these movements in terms of access to public pensions, the demand from investors on the hedge fund side has gone up significantly,” he said.
Although the scandal surrounding trustees receiving illegal payments from fund marketeers has been confined to the US, Nicola Ralston of PiRho Investment Consulting believes a similar situation may exist in the UK, despite the greater reliance on a protective buffer of independent investment consultants inbetween pension trustees and marketing companies.
“There isn’t the level of awareness you would expect from UK pension schemes. Investors often think they are receiving independent advice but do need to be aware when marketers are receiving remuneration directly from the product provider,” said Ralston.
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