Author: Ted Ballantine

One of the top investment staffers at the Canada Pension Plan Investment Board is moving to Carlyle Group.

CPPIB made several new appointments following the move.

More on the Carlyle move from the Wall Street Journal:

Carlyle Group LP hired a senior executive from Canada’s biggest pension fund to oversee debt investing, part of the asset manager’s effort to regroup from setbacks in its credit and hedge funds business.

Washington, D.C.-based Carlyle tapped Mark Jenkins, most recently head of global private investments at Canada Pension Plan Investment Board, for the newly created position, according to a statement.

Global market strategies has been a sore spot for Carlyle, largely because of struggles at its hedge funds Claren Road Asset Management, Vermillion Asset Management LLC and Emerging Sovereign Group LLC. In May, Mitch Petrick stepped down from a role running the $34.7 billion business. Carlyle tasked longtime private-equity executive Kewsong Lee to rebuild it and has said it is reviewing options to improve the unit’s performance.

Mr. Jenkins is focused on the unit’s credit investing, which includes energy lending, providing capital to mid-sized companies and bets on distressed debt.

[…]

During his eight years at CPPIB, he built the pension fund’s direct-lending business and oversaw its $12 billion acquisition of General Electric Co. ’s private-equity lending business, Antares Capital. Before that, Mr. Jenkins co-led Barclays PLC’s leveraged-finance business in New York and worked in Goldman Sachs Group Inc. ’s finance and fixed-income departments.

And the other moves at the CPPIB, from a press release:

--  Graeme Eadie is appointed Senior Managing Director & Global Head of Real
    Assets, a new investment department that brings together the Real Estate
    Investments department with our existing Infrastructure and Agriculture
    groups. This change will create a better alignment with our Strategic
    Portfolio. Mr. Eadie has been with CPPIB since 2005, and was most
    recently Senior Managing Director & Global Head of Real Estate
    Investments. 
    
--  Shane Feeney is appointed Senior Managing Director & Global Head of
    Private Investments. Mr. Feeney will also join CPPIB's Senior Management
    Team. In this role, Mr. Feeney will be responsible for CPPIB's private
    investment activities and will report to Mark Machin. Mr. Feeney was
    most recently Managing Director, Head of Direct Private Equity for
    CPPIB. He joined CPPIB in 2010 and has 18 years of private equity
    experience. Before joining CPPIB, he was a partner and founding member
    of Hermes Fund Managers Limited's direct private equity business. He had
    also previously been an Associate Director with Morgan Grenfell Private
    Equity in London.  
    
--  Ryan Selwood is appointed Managing Director, Head of Direct Private
    Equity, and will be responsible for overseeing co-sponsorships and other
    direct private equity transactions. Mr. Selwood was most recently a
    Managing Director in the Direct Private Equity group and lead for
    CPPIB's financial institutions investing initiative. Mr. Selwood
    previously led CPPIB's direct private equity activities in Europe. Prior
    to joining CPPIB in 2006, Mr. Selwood was a Vice-President at Merrill
    Lynch & Co. in the Financial Institutions Group in the Investment
    Banking Division in New York.

The board of the New York City Employees’ Retirement System voted this week to explore the possibility of divesting from private prisons.

City Comptroller Scott Stringer said he’d propose the same resolution at the city’s other four pension funds, as well.

More from Politico:

The city’s five pension funds, which hold a cumulative $154 billion in assets, altogether have an estimated $20 million worth of holdings in private prisons, and NYCERS, which holds roughly $51.2 billion in assets, has private prison holdings worth roughly $6 million.

“Prisons should not be profitable at the expense of humane conditions and safety,” said John Adler, the Director of the Mayor’s Office of Pensions and Investments and chair of the NYCERS Board, in an emailed statement.

“If NYCERS can responsibly divest from corporations that run private prisons, the City is eager to do its part in working to eliminate private prisons,” Adler said.

Chicago Mayor Rahm Emanuel this week released an actuarial report on his proposal to raise the city’s water and sewer tax and use the revenue to fund the city’s pension funds.

Emanuel is trying to prove to lawmakers that the windfall of new revenue from the tax will be sufficient to improve pension funding.

But some lawmakers are peeved that Emanuel waited so long to produce the hard numbers.

From the Chicago-Sun Times:

On the eve of a crucial Finance Committee vote, Mayor Rahm Emanuel released an actuarial analysis in hopes of proving to aldermen that his 29.5 percent tax on water and sewer bills will be enough to save the largest of Chicago’s four city employee pension funds.

It didn’t work with the anti-Emanuel Progressive Caucus that demanded the study of the mayor’s plan for the Municipal Employees Pension Fund weeks ago and was miffed about getting it hours before the vote.

“The numbers just don’t add up . . . In 2023, there will be a pretty huge gap. There’ll have to be some other source to pay for that gap,” said Ald. Scott Waguespack (32nd).

[…]

Civic Federation President Laurence Msall said the analysis shows that the infusion of $1 billion in new revenue from the new utility tax by 2023 will put the city’s largest pension fund in a “significantly better place.”

But Msall noted that even with that windfall — and continued contributions from property taxes, the corporate fund and enterprise funds that support operations of O’Hare and Midway Airports as well as the city’s water and sewer systems — the condition of the pension fund will continue to drop over the next five years with “more benefits going out than coming in.”

City CFO Carol Brown defended the proposal:

Budget Director Alex Holt and Chief Financial Officer Carole Brown acknowledged that increased funding will be needed after the “ramp-up” to a so-called “actuarially required contribution.”

[…]

Noting that the 29.5 percent tax on water and sewer bills would be phased in, Holt said, “It’s the growth over four years that gets us to the ramp. At the end of that period, there will need to be further savings or further revenue to fund the ongoing increase. There is room for further increasing the water-sewer tax. But there are other possibilities as well. The mayor has been big on further benefit reforms. Those may produce future savings. There are other options as well. Going from contributing $1 billion in six years to $3 billion in six years should help investment returns and allow them to not have to spend so much of their assets on benefits.”

Future county board members in Illinois won’t be receiving pensions unless they meticulously documents their work hours and pass a certain threshold, according to a statewide law signed by Gov. Bruce Rauner.

The law follows a controversy around board members claiming their pensions without working the required amount of hours.

The law received a rare showing of bipartisan support in the state legislature.

From the Chicago Tribune:

[State Rep. Jack Franks] got pension fund officials to investigate whether McHenry board members were improperly claiming the pensions despite not working the required 1,000 hours a year.

Eighteen of the 24 board members signed affidavits saying that they had worked enough hours to qualify. But when pension fund Executive Director Louis Kosiba asked to verify their claims, board members said they could not go back and document all their hours, noting that much of their work occurs outside of official settings, reading documents and talking to constituents.

In general, county board members are required to work at least 600 or 1,000 hours each year, varying by the county, to qualify for the Illinois Municipal Retirement Fund pension.

The retirement fund guidelines stated that a 1,000-hour limit — equal to about 20 hours a week — would make it “highly unusual” for any county board members to qualify.

Franks objected that county board members were trying to get a full-time taxpayer benefit for part-time work.

Massachusetts PRIM’s senior investment officer talked to Bloomberg BNA this week about the board’s success using managed accounts to change the landscape of its hedge fund portfolio.

Among the benefits: lower fees and greater transparency. From BNA:

Hedge Fund Transparency

[…] Managed accounts provide full transparency over what a hedge fund is doing with PRIM’s investments, said Nierenberg.

This enables PRIM, which has about $6 billion—or about 9 percent of its assets—in hedge funds and related investments, to “see in virtually real time” whether a hedge fund has been doing what it was hired to do.

PRIM may learn, for instance, that it needs to “fill in the gap” with other investments to account for what the hedge fund hasn’t been investing in, he said. Such transparency allows PRIM to accurately know how much risk exposure it has at any given time.

Negotiating Lower Fees

Many investors, including public plan trustees, have been concerned about the high fees charged by hedge funds, which commonly charge 2 percent in fees in addition to 20 percent of the hedge fund’s gains.

Nierenberg said that PRIM has been able to keep fees down by negotiating fee structures that are much lower than those typically charged to commingled account investors.

He said that the typical fee structure assessed in commingled arrangements may give way to something more like a 1 percent management fee and a 10 percent of gain carry. “Both the management fee and the carry are separate forms of manager compensation that can be negotiated,” he said.

In addition, Nierenberg said that PRIM has negotiated lower fees by customizing the services it gets in its managed accounts. For example, sometimes expenses that should be absorbed by the fund will get passed on to commingled account investors, he said. In managed accounts, the PRIM can negotiate the specific expenses that it will pay for, he said.