Blackstone Fights Proposed Curb On Placement Agents In Calif.

Apr 9 2010 | 1:23am ET

The Blackstone Group is putting its considerable weight behind an effort to ban alternative investment firms from paying contingency fees to placement agents.

The New York-based private equity giant, which owns its own placement agency, the Park Hill Group, has hired a California lobbying firm as part of its bid to see the bill defeated in the California Legislature. Despite the recent pay-to-play scandal at New York’s main public pension fund, Blackstone says that placement agents, which typically get between 0.5% and 3% of the mandates they win for clients, are getting a bad rap.

“It’s just like the state of California looking to sell bonds,” Blackstone spokesman Peter Rose told Bloomberg News. “They would hire a middleman”—a municipal bond underwriter—“to market those bonds to whoever buys bonds.”

But California’s treasurer and the country’s largest public pension fund, the California Public Employees’ Retirement System, which proposed the bill, disagree.

“The contingency fees are too much of a jackpot for placement agents” and “invite corrupt practices,” California Treasurer Bill Lockyer told Bloomberg.

And Lockyer warns that Blackstone and other placement agents should be careful of what they wish for. If the current bill fails—it requires a two-thirds majority vote by the Legislature—he said he will propose a bill to ban placement agents from both CalPERS and the California State Teachers’ Retirement System, the second-biggest public pension fund in the U.S.


In Depth

Royalties: The Alternative Assets of the Music Industry

Jul 8 2016 | 7:01pm ET

Recent market volatility has investors seeking greater insight into alternative...

Lifestyle

Vortic: Making Great American Watches Again

Jul 25 2016 | 6:29pm ET

If you are compelled by stories of entrepreneurial vision & drive, or simply...

Guest Contributor

MPI: Like Stellar Returns? Better Understand the Risks First

Jul 22 2016 | 8:44pm ET

When the press reports extraordinarily strong relative or risk-adjusted returns...