Quadrangle wins investor vote of confidence: source

NEW YORK (Reuters) - Media-focused private equity firm Quadrangle Group has won a vote of confidence from investors in its $2 billion fund, a source familiar with the situation said on Sunday, even though New York City and State pension funds said they would no longer make investments.

The fund faced a deadline of Friday by which investors could say whether they no longer wanted it to make new investments due to the departure of a so-called "key man," co-founder Steven Rattner. Rattner left Quadrangle in February to become the U.S. adviser on autos.

Quadrangle's $2 billion fund had about $500 million left to spend. It has already invested about 75 percent, the firm's co-president Joshua Steiner told Reuters in March.

Rather than voting "yes" or "no" for continuing investment, investors were just given the opportunity to object. The source who spoke to Reuters said there had been few objections -- meaning that a substantial amount supported the fund.

Quadrangle declined to comment on the vote.

The support is particularly significant as since the global financial crisis hit and equity markets slid, private equity firms have found it exceptionally hard to raise new capital.

The vote had become high profile because of Quadrangle's links to the New York attorney general's probe into a state pension pay-to-play scheme that has led to the indictment of Henry Morris, who was the former state comptroller's top fund-raiser.

Neither Rattner nor Quadrangle has been accused of any wrongdoing.

But New York City and state pension funds on Friday made public that they voted to block new investments by Quadrangle.

"Given the current investigation by the New York State Attorney General regarding the Hank Morris matter, I believed that it was in the best interest of the Systems to vote to terminate the commitment period, and my Office voted accordingly," City Comptroller William Thompson said in a statement on Friday.

Thompson helps oversee the city's pension funds and three of them -- New York City Employees' Retirement System, Teachers' Retirement System and the Police Pension Fund -- invested a total of $115 million in Quadrangle in 2005 and 2006.

New York state's pension fund also voted not to place any new investments with private equity fund Quadrangle, a spokesman for the state comptroller said on Friday.

Rattner was the person only identified as a "senior executive" of Quadrangle Group in a U.S. Securities and Exchange Commission complaint against two former New York political officials and others, a source familiar with the situation previously told Reuters.

The "senior executive" met with a consultant, and then the firm paid a $1.1 million fee after receiving an investment from New York's pension fund, the complaint said.