* Lands at secondary buyer Landmark Partners
* Follows NYC committing $400 mln to same firm
* Should pension rules be tightened?
By Gregory Roth
NEW YORK, May 23 (Reuters-BUYOUTS) - Barry Miller, who has
been head of private equity for the New York City Pension
Systems, has landed a job at Landmark Partners, a secondary firm
to which the pensions recently made a sizeable commitment. The
timing of Miller's move raises questions about whether the
city's pensions, and pensions generally, should have stricter
rules governing investment officers who wish to leave for money
New York City Pension Systems, which includes five pension
funds with $142 billion in assets, committed $400 million in
December to Landmark Equity Partners XV LP, the firm's latest
flagship secondary fund. That commitment, which was spread among
the city's five municipal pensions, closed roughly five months
before Miller announced that he was joining Landmark Partners.
Conversations between Miller and Landmark Partners about
joining the firm "began in late January or early February,"
according to Francisco Borges, Landmark Partners' chairman and
"I looked at a bunch of things and Landmark made the most
sense to me. It's a very established brand," said Miller, 43,
who has been with the New York City pension system since 2011
and before that worked in the secondary market.
Having the ability to join a money management firm so soon
after being involved in a decision to back that firm does seem
to invite temptation - the temptation to give the firm more
consideration than it deserves, based solely on the merits. Said
Charles Elson, a professor of finance and corporate governance
at the University of Delaware: "It certainly raises questions,
and it's the optics that create the questions."
"This reeks of impropriety and inappropriateness," said
Daniel Dromm, a New York City councilman representing Queens.
"Appearance-wise, it looks as though he got the job because he
recommended the commitment." He suggested a waiting period "of
at least a year" before public officials are allowed to begin
working for firms they conducted business with while in office.
Although nothing under New York City Pensions Systems' rules
forbids such a move, according to an executive there, other
pensions, such as the California Public Employees Retirement
System, do have rules against investment officers joining a firm
they did business with while at the pension within a set period
of time. CalPERS in 2012 enacted a two-year waiting period on
investment officers before working for such firms.
Landmark Partners "started talking to him after the
commitment closed," said Lawrence Schloss, the chief investment
officer for New York City Pension Systems. "We have rules. He
can't be in a dialogue about a job while we're doing business
with them." In addition, Schloss said, "you can't call on the
city (to solicit investments) for a year after you leave."
Schloss added that the city has been an investor with
Landmark Partners since 2002, "long before Barry came on board."
The city's pensions invested in Landmark XI in 2002, Landmark
XIII in 2006 and Landmark XIV in 2008, he said.
New York City doubled the size of its most recent commitment
with Landmark Partners, up from the $200 million that it
committed in 2008. Miller attributed the rise in part to the
strong performance of the predecessor fund. According to New
York City return data from September 2012, the fund has produced
a net IRR of 20 percent, and a net investment multiple of 1.2x.
Landmark Partners' Borges said he wasn't concerned about any
appearance of a conflict of interest in hiring Miller. "It's
very clear that (hiring Miller) is entirely appropriate," he
said. New York City's process for making its commitment to
Landmark Partners' latest fund was a "rigorous one" that was
reviewed and signed off by Schloss, as well as the pension
funds' outside consultants, and by the individual pension
boards, he said. "No single individual has the authority to
commit," said Borges.
"There are always going to be doubters," said Miller of the
potential for some to perceive a conflict of interest. "For some
people, the glass is half full, and for others, it's half
empty," he said. As head of private equity, he said, it has
been his job to find firms that are "best in class." Thus,
"it's natural that you'd want to work for a firm that you think
is best in class too," he said.
Prior to joining New York City's Bureau of Asset Management,
Miller worked for Pomona Capital and AXA Private Equity, both of
which have large secondary businesses. In 2012, Miller
engineered a $1 billion secondary sale of private equity assets,
mainly to help reduce New York City's large number of private
equity relationships. In the sale, which involved 11 funds
managed by nine different firms, the pensions reduced the number
of relationships to 99 from 108.
New York City's five municipal pensions have $8.8 billion in
invested private equity capital, roughly 6.8 percent of the
overall portfolio, according to Schloss. That compares to an
average 7 percent private equity target across the five pension