CalPERS Questions Consultants Again –

SACRAMENTO, Calif. – For the second time in less than a year, California Public Employees’ Retirement System (CalPERS) has questioned its two advisers, Pacific Corporate Group Inc. (PCG) and Hamilton Lane Advisors, about how recent staff changes at the firms would affect their services to the $130 billion pension.

CalPERS Senior Investment Officer Barry Gonder in late October sent a letter to PCG asking how former Managing Director Brian Kinsman’s departure would affect the CalPERS account. Mr. Gonder also sent a letter to Hamilton Lane asking how its October acquisition of Stone Pine Asset Management (SPAM) (VCJ, December 1998, page 8) would alter Hamilton Lane’s investment focus. Both advisory groups received similar letters last spring after each lost staff members (VCJ, July 1998, page 6). Generally, Hamilton Lane reviews partnerships and co-investments for CalPERS while PCG studies direct-investing opportunities.

CalPERS’ investment committee was slated to review the work of both advisers at a mid-December meeting during the pension’s annual assessment of alternative investment consultants. Mr. Kinsman, who is a “key person” in PCG’s contract with CalPERS, left PCG in October to open his own buyouts group (VCJ, December 1998, page 6). PCG Chief Executive Christopher Bower, who has worked on the CalPERS account since 1989 to help create its direct investment program, informed CalPERS that he would assume Mr. Kinsman’s role. Mr. Bower also noted in his written response to CalPERS that PCG has restructured its compensation program in an effort to retain staff. PCG plans to add two senior investment staff members and one very senior investment professional early in 1999, Mr. Bowman said. In addition to Mr. Kinsman, PCG lost two investment vice presidents and a vice president of marketing in 1998, and two managing directors left in 1997 (VCJ, May 1998, page 5). Hamilton Lane lost a principal and an investments monitor last year.

Hamilton Lane President Mario Giannini told CalPERS there would be no change in who handled the pension’s account in light of the SPAM purchase, although the addition of SPAM’s staff fits into Hamilton Lane’s plans to add to its ranks and will enhance the firm’s due diligence capabilities. Mr. Giannini also said he did not foresee the acquisition having “any material impact” on his advisory firm’s financial condition or causing any conflict of interest with CalPERS. Mr. Giannini said he viewed CalPERS’ questions as a “fairly routine” response to changes within the pension’s advisory firms. – S.N.

SACRAMENTO, Calif. – For the second time in less than a year, California Public Employees’ Retirement System (CalPERS) has questioned its two advisers, Pacific Corporate Group Inc. (PCG) and Hamilton Lane Advisors, about how recent staff changes at the firms would affect their services to the $130 billion pension.

CalPERS Senior Investment Officer Barry Gonder in late October sent a letter to PCG asking how former Managing Director Brian Kinsman’s departure would affect the CalPERS account. Mr. Gonder also sent a letter to Hamilton Lane asking how its October acquisition of Stone Pine Asset Management (SPAM) (VCJ, December 1998, page 8) would alter Hamilton Lane’s investment focus. Both advisory groups received similar letters last spring after each lost staff members (VCJ, July 1998, page 6). Generally, Hamilton Lane reviews partnerships and co-investments for CalPERS while PCG studies direct-investing opportunities.

CalPERS’ investment committee was slated to review the work of both advisers at a mid-December meeting during the pension’s annual assessment of alternative investment consultants. Mr. Kinsman, who is a “key person” in PCG’s contract with CalPERS, left PCG in October to open his own buyouts group (VCJ, December 1998, page 6). PCG Chief Executive Christopher Bower, who has worked on the CalPERS account since 1989 to help create its direct investment program, informed CalPERS that he would assume Mr. Kinsman’s role. Mr. Bower also noted in his written response to CalPERS that PCG has restructured its compensation program in an effort to retain staff. PCG plans to add two senior investment staff members and one very senior investment professional early in 1999, Mr. Bowman said. In addition to Mr. Kinsman, PCG lost two investment vice presidents and a vice president of marketing in 1998, and two managing directors left in 1997 (VCJ, May 1998, page 5). Hamilton Lane lost a principal and an investments monitor last year.

Hamilton Lane President Mario Giannini told CalPERS there would be no change in who handled the pension’s account in light of the SPAM purchase, although the addition of SPAM’s staff fits into Hamilton Lane’s plans to add to its ranks and will enhance the firm’s due diligence capabilities. Mr. Giannini also said he did not foresee the acquisition having “any material impact” on his advisory firm’s financial condition or causing any conflict of interest with CalPERS. Mr. Giannini said he viewed CalPERS’ questions as a “fairly routine” response to changes within the pension’s advisory firms.