New York Still Shy About Private Equity

Jun 14 2010 | 11:44am ET

A pay-to-play scandal involving alternative investment firms continues to haunt a New York public pension fund, and the private equity firms that hope to do business with it.

For the fourth consecutive month, the New York State Common Retirement Fund did not allocate a dime to p.e. The pension has continued to shun the asset class despite its strong performance last year, when CRF’s private equity portfolio returned 11.6%, reports.

New York completely re-jiggered its alternative investments portfolio following a damaging scandal in which several major firms, including the Carlyle Group and Quadrangle Group, were accused of paying kickbacks and political contributions to win mandates from the pension fund. Several of the firms, including Carlyle and Quadrangle, have agreed to settlements to close the books on their roles—and foreswearing the use of placement agents. Several former New York officials and at least one hedge fund manager have been arrested and charged in the scam.

Despite the involvement of both hedge funds and p.e. firms in the pay-to-play scandal, the CRF has been less reticent to invest with the former. While the pension invested only $7 million with hedge funds in April, it has poured several hundred million dollars into hedge funds this year.

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