…as New Mexico Governor latest to ban third-party marketers

The New Mexico Governor, Bill Richardson has directed the State Investment Office to ban the use of third-party placement agents on investments of the state’s Permanent Funds, and directed the Education Retirement Board to move forward with a six-month ban on third-party marketers as it evaluates the long-term implications of a permanent ban.

The New Mexico State Investment Office and the state’s Education Retirement Board were also recently directed
by Richardson to terminate contracts with private equity advisor, Aldus Equity.

In addition an independent review of investment practices and policies, including the use of third-party marketers, has been commissioned and the state Board of Finance and the Legislative Council Service will work on the scope of the review, as well as an appropriate budget.

“I feel strongly that a ban on these agents is necessary to restore confidence in our investment practices,”the Governor said. “The practice of fund managers paying huge fees to third-party agents may be legal and legitimate, but the potential for a conflict of interest is troubling. I’d rather remove that potential conflict and be confident that our investments are not tainted in any way.”

The move by New Mexico is the latest in a raft of public pension plans putting bans on placement agents, with the New York City Employees’ Retirement System and the New York City Policy Pension Fund among others already placing bans on the use of placement agents.

The New York Attorney General, Andrew Cuomo, is leading the pension fund investigation and as a result of a meeting with 36 Attorneys General’s offices has created a multi-state task force to share information explore pension fund abuse.

“The task force will allow us to have a unified, efficient method for gathering information as we fight to combat corruption and restore transparency and integrity to public pension funds,” he said. “Pension funds across the country are now taking appropriate steps to clean up abuses – but we should not forget that the real goal must be systemic reform so we can avoid continually closing the barn door after the horse has bolted the stable.”