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Wetherly Capital Emerging as Leading Fund Placement Firm

The intersection of business and politics has been a profitable one for Dan Weinstein, managing director of Wetherly Capital Group.


The Brentwood firm has emerged as one of the top 10 placement agents in the United States, raising $1.5 billion from large pension funds like the California Public Employees’ Retirement System.


Placement agents are politically connected matchmakers who help hedge funds, private equity firms and real estate funds attract investments from public and private pension funds.


Weinstein, one of three managing partners at Wetherly, has raised money for nearly a dozen private funds, including Ares Capital Management, Freeman Spogli & Co., billionaire Ron Burkle’s Yucaipa Cos. and Aurora Capital Partners, whose founder, Gerald Parsky, led President Bush’s reelection campaign in California.


Weinstein has been a longtime Democratic fundraiser, working for former Gov. Gray Davis and former dtate Treasurer Kathleen Brown. But he says he’s strictly non-partisan.


“If we think a firm has a strong team and an impressive track record and investment strategy, then we can believe in them,” he said. “With so much competition out there, all of these funds are competing for money and they need someone who is going to advocate on their behalf.”


Independent placement agents are the underdogs in a field long dominated by investment banks such as Merrill Lynch & Co. and Credit Suisse First Boston. But they have made progress in the past five years, as pension funds change their investment mix. The funds are reducing their exposure to stocks, where Wall Street firms have an advantage, while increasing investments in alternative asset classes like real estate.


A survey of 125 global pension fund managers by consulting firm Watson Wyatt found that investments in private equity, which includes real estate and hedge funds, jumped 14 percent last year to $17 billion. Private equity funds now account for $193 billion of pension fund assets, or 19 percent of the total $1 trillion invested in alternative asset classes.


Sean Harrigan, who was ousted as president of Calpers’ board last year, said placement agents have taken over the job of marketing private equity funds, leaving the critical work of investing the assets to the general partners. “They can be an asset for the (pension) staff who are doing due diligence and screening various proposals,” he said.


Weinstein says he had “an epiphany” after the 1992 Los Angeles riots, when he was working as a political director for the United Food and Commercial Workers union in Los Angeles. At the time, a supermarket in South Central had nearly burned to the ground and Burkle was part of a team that rebuilt the shopping center with union and community labor.


“I realized then that there was a way to rebuild the community by creating jobs and bringing capital to an area that was starved for it,” said Weinstein.


Burkle hired him as an advocate to help bring investments to Yucaipa. After a few years, Weinstein gained other well-heeled clients such as Mike Steed, a former Democratic National Committee official who is managing director at Paladin Capital Group in Washington. Steed, a former executive at Ullico Inc., was an early investor in Gary Winnick’s Global Crossing Ltd. Steed and labor officials came under fire for profiting from stock sales before Global Crossing went bankrupt.


Mario Giannini, chief executive of Philadelphia-based money management firm Hamilton Lane, said placement agents like Wetherly Capital provide an extra layer of due diligence.


Calpers launched an investment program in 2002 to make investments aimed at revitalizing underserved urban and rural markets. To that end, Wetherly Capital worked to tailor the pitch of Henry Cisneros’ American CityVista and City View, a joint venture with Santa Monica-based Saybrook Capital that wants to build affordable housing for the working class.


Wetherly has 12 employees and is opening an office in New York with the intention of courting the corporate pension funds of General Electric Co., DuPont Co. and others. The firm earns money by taking a percentage of the amount raised for each client.


The partners still keep a foot in politics. Weinstein was finance chair for Bob Hertzberg’s mayoral campaign, and was a Davis appointee to the California State University Board of Trustees before Gov. Arnold Schwarzenegger removed him as one of his first official acts.


Another managing director at Wetherly, Vicki Schiff, is a commissioner of the Los Angeles City Employees’ Retirement System, and Wetherly Director Peter Borges is on the board of Genesis L.A. Economic Development Growth Corp.


As with so many issues involving money and politics, there may be no way to separate relationships from party affiliation.


“You have to be connected on both sides of the aisles,” said Borges, former president of Retail Initiative Inc., which pioneered shopping center development in urban markets during the 1990s. “When you’re dealing with public funds, first and foremost, you’re looking for someone who can actually get the job done.”


The Brentwood firm has emerged as one of the top 10 placement agents in the United States, raising $1.5 billion from large pension funds like the California Public Employees’ Retirement System.


Placement agents are politically connected matchmakers who help hedge funds, private equity firms and real estate funds attract investments from public and private pension funds.


Weinstein, one of three managing partners at Wetherly, has raised money for nearly a dozen private funds, including Ares Capital Management, Freeman Spogli & Co., billionaire Ron Burkle’s Yucaipa Cos. and Aurora Capital Partners, whose founder, Gerald Parsky, led President Bush’s reelection campaign in California.


Weinstein has been a longtime Democratic fundraiser, working for former Gov. Gray Davis and former dtate Treasurer Kathleen Brown. But he says he’s strictly non-partisan.


“If we think a firm has a strong team and an impressive track record and investment strategy, then we can believe in them,” he said. “With so much competition out there, all of these funds are competing for money and they need someone who is going to advocate on their behalf.”


Independent placement agents are the underdogs in a field long dominated by investment banks such as Merrill Lynch & Co. and Credit Suisse First Boston. But they have made progress in the past five years, as pension funds change their investment mix. The funds are reducing their exposure to stocks, where Wall Street firms have an advantage, while increasing investments in alternative asset classes like real estate.


A survey of 125 global pension fund managers by consulting firm Watson Wyatt found that investments in private equity, which includes real estate and hedge funds, jumped 14 percent last year to $17 billion. Private equity funds now account for $193 billion of pension fund assets, or 19 percent of the total $1 trillion invested in alternative asset classes.


Sean Harrigan, who was ousted as president of Calpers’ board last year, said placement agents have taken over the job of marketing private equity funds, leaving the critical work of investing the assets to the general partners. “They can be an asset for the (pension) staff who are doing due diligence and screening various proposals,” he said.


Weinstein says he had “an epiphany” after the 1992 Los Angeles riots, when he was working as a political director for the United Food and Commercial Workers union in Los Angeles. At the time, a supermarket in South Central had nearly burned to the ground and Burkle was part of a team that rebuilt the shopping center with union and community labor.


“I realized then that there was a way to rebuild the community by creating jobs and bringing capital to an area that was starved for it,” said Weinstein.


Burkle hired him as an advocate to help bring investments to Yucaipa. After a few years, Weinstein gained other well-heeled clients such as Mike Steed, a former Democratic National Committee official who is managing director at Paladin Capital Group in Washington. Steed, a former executive at Ullico Inc., was an early investor in Gary Winnick’s Global Crossing Ltd. Steed and labor officials came under fire for profiting from stock sales before Global Crossing went bankrupt.


Mario Giannini, chief executive of Philadelphia-based money management firm Hamilton Lane, said placement agents like Wetherly Capital provide an extra layer of due diligence.


Calpers launched an investment program in 2002 to make investments aimed at revitalizing underserved urban and rural markets. To that end, Wetherly Capital worked to tailor the pitch of Henry Cisneros’ American CityVista and City View, a joint venture with Santa Monica-based Saybrook Capital that wants to build affordable housing for the working class.


Wetherly has 12 employees and is opening an office in New York with the intention of courting the corporate pension funds of General Electric Co., DuPont Co. and others. The firm earns money by taking a percentage of the amount raised for each client.


The partners still keep a foot in politics. Weinstein was finance chair for Bob Hertzberg’s mayoral campaign, and was a Davis appointee to the California State University Board of Trustees before Gov. Arnold Schwarzenegger removed him as one of his first official acts.


Another managing director at Wetherly, Vicki Schiff, is a commissioner of the Los Angeles City Employees’ Retirement System, and Wetherly Director Peter Borges is on the board of Genesis L.A. Economic Development Growth Corp.


As with so many issues involving money and politics, there may be no way to separate relationships from party affiliation.


“You have to be connected on both sides of the aisles,” said Borges, former president of Retail Initiative Inc., which pioneered shopping center development in urban markets during the 1990s. “When you’re dealing with public funds, first and foremost, you’re looking for someone who can actually get the job done.”

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