How Many Placement Agents Does It Take To Raise A Fund?
Wetherly Capital Group’s settlement with New York Attorney General Andrew Cuomo and decision to exit the placement agent industry are tied in part to its marketing of the debut fund raised by Ares Management LLC.
According to Cuomo, Ares Corporate Opportunities Fund LP was one of three private equity funds that Wetherly engaged Hank Morris as a sub-agent on; the other two are Freeman Spogli & Co. and Levine Leichtman Capital Partners. Morris, one of the central figures in the New York pay-to-play scandal, subsequently shared in the placement fees that Wetherly got from the firms. He has denied wrongdoing.
Ares Corporate Opportunities serves as a good example of just how convoluted the placement agent ties can get when a firm is raising a fund – particularly a debut fund. Recent disclosures from California Public Employees’ Retirement System show that at least five placement agents – six, counting Morris – were involved in raising the fund. Besides Wetherly, they included ARVCO Financial Ventures LLC, Liati Group LLC, Merrill Lynch & Co. and Platinum Advisors LLC/Gold Bridge Capital.
Here’s how it worked. Ares originally engaged Merrill Lynch to act as a non-exclusive placement agent for ACOF I, according to Calpers’ disclosures. But partway through the fund-raising, Merrill Lynch suffered some personnel departures, prompting Ares to enter into a consulting agreement with Platinum Advisors to raise capital commitments from a “subset of the Fund’s prospective clients,” Ares wrote in a disclosure to Calpers.
Platinum then engaged DAV/Wetherly, as Wetherly Capital is also known, as a sub-agent, “in part in consideration of the difficult fund-raising environment,” according to Ares. DAV/Wetherly, in addition to hiring Morris, also hired Liati Group as its own sub-agent.
Then there’s ARVCO, the placement firm run by former Calpers board member Al Villalobos, whose role in raising capital from the pension fund is being investigated by Calpers. (Villalobos has said he is cooperating with Calpers’ probe.) Ares itself engaged that firm to help with a subset of LPs by assisting in “structuring and early development of the Fund, including assisting with the creation of presentation materials, advising with respect to the arranging of meetings with the key investment personnel of potential institutional investors and other related activities.”
A person familiar with Ares said the firm only directly hired two agents for its debut fund, largely due to the challenging fund-raising environment, particularly for first-time funds, back in 2001. He added there was nothing illegal or questionable about using both ARVCO and Platinum to market the fund, even to the same LP, as the firms had skill sets that complemented each other.
He also noted that the fund has performed well. As of June 30, 2009, Calpers’ $100 million commitment had generated at 14.4% net IRR, according to the pension fund’s data.
The disclosures from Calpers and in New York cast new light on the practice of hiring sub-agents, which until recently hadn’t attracted much attention. These disclosures indicate the practice has been quite widespread.
Wetherly said in a statement after news of the New York Settlement that “our firm supports Mr. Cuomo’s proposals because we think they are good for the industry. We are very pleased to have resolved all issues.”
“At no time was Wetherly ever charged with any wrongdoing,” the firm said.
Interviewed before news of its New York settlement broke, Wetherly founder Dan Weinstein would not comment on specific sub-agent relationships as a matter of policy, but offered some insight on why the firm occasionally hired them.
“We had 10 full-time professionals in three offices but there were a number of local markets where we weren’t as well-established,” Weinstein said. “Much like the brokerage business, it allowed our firm to provide more comprehensive service and coverage.”
However, he acknowledges that damage can be done to a firm’s reputation if these sub-agents get into trouble. “In hindsight, if there’s one thing that I’d do differently, it would have been never to hire a sub-agent,” Weinstein said.
Indeed, the practice, while certainly not illegal, may now be on its way to extinction. Said one East Coast placement agent: “We were reluctant to do it before and we definitely won’t do it now. Everyone’s more careful about the company they keep.”
about 1 month ago
Lol i was ganna say some good things but then i read the "christian club"…so…i got nothing but…umm…selling books?LMAO
about 1 month ago
I don't think there is anything or anyone in this world that I detest more than B. Hussein Obama and Nancy Pelosi.
about 1 month ago
i only know they sell them in the northwest sorry dude
about 1 month ago
“With the success of San Francisco’s Pavement to Parks trial plazas, the city is about to unveil its newest plan to use its streets for something other than cars when it converts parking spaces to public space by extending sidewalks into the street with durable wood platforms. City planners acknowledge that the inspiration for these new pedestrian spaces came from the success of Park(ing) Day, an international sensation developed by Rebar, where people in cities around the globe occupy parking spaces for one day a year and build pocket parks and other innovative facilities. The first iteration of the loosely dubbed Pavement to Parks 2.0 projects, which could happen in the next few weeks, will be the transformation of two parking spaces in front of Mojo Bicycle Café on Divisadero Street, in coordination with the massive construction project that is remaking the Divisadero corridor. “The idea is essentially to build a cheaper bulbout, to get the same effect as a $100,000 [concrete] bulbout at a fraction of the funds,” said the San Francisco Planning Department’s Andres Power, project manager for Pavement to Parks. “We will take the occupation of a sidewalk off the sidewalk and move it into the parking lane.” District 5 Supervisor Ross Mirkarimi said he was an early champion of the project and, after seeing the impact of Park(ing) Day, he began talking with merchants along Divisadero about trying something like the temporary parking space interventions, but making them more permanent. “I think San Francisco loves innovation,” said Mirkarimi, adding that his district was a perfect location for the first trial of this kind given how many cyclists and pedestrians frequent the area. “There is a hipness that’s part of Mojo’s DNA as well as others on the Divisadero corridor.” As for the innovation of taking curb space that has been used for parking cars for more than half a century, the project is only possible because it is a trial, said Power. There was considerable debate about how to build a durable and attractive platform that wouldn’t interfere with drainage and sanitation. The Department of Public Works (DPW), Planning, and the San Francisco Public Utilities Commission (PUC) landed on a solution they believe will be sturdy and safe, said Power. The platforms will extend 7 feet from the curb, slightly less than the width of most cars, so vehicles that are parked at either end will serve as a buffer to passing traffic. Each parking space is approximately 20 feet long, so the Mojo platform will be just over 40 feet in length. Power said his department encouraged the designer to build a platform that would be modular and replicable, with the hope that more projects could be added in other parts of the city if this one is successful. Though the Chronicle reported that similar sidewalk extensions could be possible in North Beach, at Park(ing) Day sites like Caffe Greco and Caffe Roma, no one contacted for this story would confirm future locations. Image: RG Architecture Mayor Gavin Newsom’s Office of Economic and Workforce Development provided a $5,500 grant to cover half the cost of the project, said Power, while the design and building costs were donated. The platform materials come from Bison Deck Supports, a company based in Boulder Colorado that traditionally builds roof decks, and the overall design came from RG Architecture. In addition to tables and chairs, the space will have bike racks and planter boxes, which will likely be filled with bamboo. According to RG Architecture’s Riyad Ghannam, nothing like this has ever come through his firm’s door, which inspired him to offer his services gratis. “To me, in my business, it’s 100 percent unique,” he said of the project. As for the age-old concern of merchants losing parking spaces, the businesses on Divisadero were more concerned about sidewalk space and bicycle parking, according to Remy Nelson, owner of Mojo Café and vice president of the Divisadero Merchants Association. “I think it’s really great,” said Nelson. “My shop is in the middle of a block and when I look out my front window, I’m usually looking at parked cars.” Nelson explained that a shift had occurred with the merchants on his block and along the corridor in the past few years, as the perceived need for parking garages was replaced by calls for more pedestrian space and bicycle parking. Referring to the sidewalk extension in front of his business as a “no-brainer,” Nelson predicted the transformation would catch on and other businesses would clamor for them. “The public is going to see it and they’re going to forget there ever was a parking lot there,” he said. The space will be maintained by Nelson and staff at Mojo, though the chairs and tables are open to the public, similar to the arrangement at the 17th Street and Castro trial plaza, where the movable tables and chairs are maintained by a business that fronts the pedestrian space. The Mojo project received a similar six-month permit from the city as part of the Pavement to Parks trial plazas, which will have to be renewed if it is successful. Planners are waiting for the Department of Public Works (DPW) to finish the final elements of the Divisadero reconstruction before proceeding, though that could happen in the next few weeks, according to Power. All of the materials to build are in a warehouse and will be built as soon as the street is ready. While Mayor Newsom has yet to announce the second generation of Pavement to Parks projects, Power said swift movement on the project and the coordination of all the agencies came from Astrid Haryati, the Mayor’s Director of Greening, and Ed Reiskin, the Director of the DPW. The speed of developing the project especially impressed Ghannam. “I have not seen anything like that procedurally,” he said. “I think the city is taking a little bit of a chance, but sometimes you take a chance like this and you reap the rewards.” For Nelson, the project couldn’t come quickly enough. “We need more emphasis on sidewalks, a place that’s pleasant and fun to be in,” he said. “How can we get it more sidewalk centric, less car-centric?”"
about 2 weeks ago
Do you receive a 1099 from each of your consulting clients, and then report that income on Schedules C and SE of Form 1040 for your Federal taxes? If so…
After you prepare your Federal return, you need to prepare a NJ nonresident return. That will calculate the amount of NJ taxes you need to pay on the income earned in NJ. After that, you need to prepare a NY state/city resident return. That will calculate the amount of NY taxes you need to pay on all your income (earned and unearned), reduced by a credit for the nonresident taxes you pay to NJ.
If your consulting arrangement is more complex — for instance, if you own a corporation doing the consulting in NJ which pays you a salary and/or dividends — the NJ nonresident portion may be more complex (and beyond the scope of this answer). The NY state/city resident return is still the same — report your total income, and take a credit for state income taxes paid to NJ.