Shamrock Named by New York City as Among Fired Fund Managers

Date: Wednesday, August 4, 2010
Author: Martin Z. Braun and Henry Goldman, Bloomberg

Four New York City employee pension funds paid $7.6 million to Shamrock Capital Advisors, a money manager that racked up losses of as much as 22.8 percent before it was dropped, according to City Comptroller John Liu’s office.

The firm, whose parent company was started by Roy Disney, a nephew of Walt Disney, received $275 million from funds that benefit firefighters, police officers, teachers and civil employees. The losses from the Shamrock Activist Value Fund LP, which buys stock in smaller publicly traded companies and then presses for management changes to boost share prices, ranged from 10.6 percent for the firefighters to 22.8 percent for the teachers, documents obtained from the comptroller said.

Three of the city’s pension plans also singled out Shamrock manager Dennis A. Johnson for “failure to devote substantially all of his business time and attention” to the fund, according to letters obtained from the office. The letters are dated April 1, after he resigned from Shamrock. Johnson declined to comment.

Comerica Bank, a unit of Dallas-based Comerica Inc., hired Johnson last month to be chief market strategist for its asset- management unit.

Five city pension funds, with assets totaling $103 billion, have investment policies set by separate boards and are overseen by Liu, 43, the city’s chief financial officer. Projected liabilities exceeded assets at all five as of June 30, 2007, according to the most-recently published valuation. To help make up the difference, the city will provide about $7.6 billion this fiscal year, or one in five tax dollars, so the funds have enough to pay benefits.

New Adviser Named

Concern that city pensions might not be getting the maximum returns possible led Mayor Michael Bloomberg to create the post of chief investment adviser to mayoral representatives at the funds and name Ranji Nagaswami, 46, to the job. She is a former chief investment officer with AllianceBernstein.

“Money management in this day and age is very complex, and I want to make sure we have the expertise to ensure, to the extent that we have a say in this, that these monies are run as well as they can,” Bloomberg said in announcing the Aug. 2 appointment. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

The firefighters’ pension fund dropped Shamrock in January while plans for the teachers, police officers and civil employees terminated the firm in March, according to records released to Bloomberg News under state Freedom of Information laws. The $7.6 million paid to Shamrock represented fees for services from August 2006 through March 2010, the office said in response to Bloomberg News inquiries.

Clifford Miller, a Shamrock spokesman, didn’t return a call seeking comment.

Withdrawals From Darby-ProBanco

The teachers and civil employees’ pensions also withdrew $30 million committed to Darby-ProBanco Fund II, a private- equity fund that invests in Latin American financial services companies, according to documents released by the comptroller’s office. The fund is run by Darby Overseas Investments, a subsidiary of Franklin Resources Inc.

Heather Hickson, a Darby spokeswoman, declined to comment.

The city’s civil employees’ fund also terminated a $35 million commitment to a buyout fund run by Huntsman Gay Global Capital, a private-equity company co-founded by Jon Huntsman, chairman and founder of the Huntsman Corp., the fourth-largest U.S. chemical maker. Robert Gay, a Huntsman Gay co-founder, didn’t immediately return a call seeking comment. Darby and Huntsman Gay didn’t earn any fees.

Delayed Response

Liu, elected in November after vowing to bring more transparency to city finances, delayed disclosing the identities of fund managers fired by the city’s pension funds by as long as six months, saying “premature disclosure” would harm the value of plan assets.

In an April 8 speech to business leaders in Manhattan, Liu said he terminated six investment managers for “poor performance.” After the speech, he declined to identify them, or to say how much city money they had been given or what they had been paid, which Bloomberg News cited as grounds for its Freedom of Information request. Liu’s office promised to respond by April 11.

On that date, Allen Fitzer, the comptroller’s records- access officer, identified Emerald Infrastructure Development, based in New York and Belfast, Northern Ireland, and RiverSource Investments, a subsidiary of Minneapolis-based Ameriprise Financial Inc., as two of the six.

Earlier Disclosure

Three weeks after Bloomberg News appealed the office’s refusal to name the four remaining companies, the comptroller released documents showing that three pension funds had fired Acadian Asset Management LLC, a Boston company that managed $646 million in assets for the plans.

Liu’s office disclosed the names of the three remaining firms -- Shamrock, Darby-ProBanco Fund II and Huntsman Gay Global Capital -- on July 29.

The comptroller’s Bureau of Asset Management “was constrained in its disclosure of the names of the asset- management firms until such time as an orderly transition of the substantial funds in question has been completed,” wrote Ricardo Morales, the comptroller’s general counsel, in answer to a Bloomberg News appeal of an earlier refusal to release the information.

To contact the reporter on this story: Henry Goldman in New York City Hall at hgoldman@bloomberg.net or Martin Z. Braun in New York at mbraun6@bloomberg.net.