In a press release dated May 4, 2009, Connecticut Treasurer Denise L. Nappier announced several steps that the state is taking to ensure the continuing integrity of the Connecticut Retirement Plans and Trust Funds (the “CRPTF”), in light of the ongoing criminal and civil investigations surrounding the New York Common Retirement Fund (the “CRF”) (see my blog entry of April 23, 2009).
First, the state is terminating its relationship with Aldus Capital, LLC, which had been a manager of a fund, in CRPTF’s private equity class, consisting of small and emerging sub-funds managed by others. This termination is due to Aldus’ affiliation with Aldus Equity Partners, LP, the subject of investigations growing out of its business relationship with the CRF.
Second, all of CRPTF’s fund of funds managers (those who, like Aldus Capital, LLC, are managing funds consisting of sub-funds managed by others) will be required to provide the state with additional disclosures, in the form of an affidavit from each sub-fund manager, disclosing any third party payments made by the sub-fund manager in connection with its work for CRPTF.
This disclosure rule stems from the concern that, as alleged in New York State, sub-managers are paying off placement agents to obtain the right to manage CRPTF assets. In addition, a fund of fund manager, who reports a third party payment made in connection with a sub-fund manager’s obtaining or retaining an investment contract with the state, must disclose whether the placement agent, in turn, paid any sub-agent in connection with that contract. This requirement is aimed at preventing the situation, again as alleged in New York State, in which placement agents paid sub-agents in their effort to provide fund managers with the right to manage a portion of the CRPTF.