Deals

Apollo to lower fees charged to CalPERS by $125m

The firm and the pension have forged a ‘strategic relationship' in which fees will decrease on existing and new investments Apollo manages solely on behalf of the California pension.

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Apollo Global Management will lower its management and other fees it charges to the California Public Employees’ Retirement System by $125 million over the next five years.

The fee decrease will apply to existing funds that Apollo manages “solely” on behalf of CalPERS, as well as any new commitments the pension makes to the firm. Apollo is in the early stages of raising its first private equity real estate funds, and is not believed to have any real estate separate accounts with the pension. However, the ruling could have implications for future fundraising efforts by the Leon Black-led buyout shop.

In exchange, CalPERS “will also be fully funding all of its existing capital commitments with Apollo”, the pension, the largest in the US, said in a statement.

Apollo and CalPERS have forged a “strategic relationship”, which is the outcome of a months-long review the $212 billion pension was performing on its relationship with the Leon Black-led firm. The review was sparked after CalPERS discovered last year that Apollo had paid a placement agent, Alfred Villalobos, more than $60 million to solicit the pension for more than $3 billion of commitments on behalf of Apollo. Villalobos is a former member of the CalPERS board.

It's not clear if the pension was prepared to not fully fund its existing commitments to Apollo. CalPERS and Apollo did not return calls and emails for comment by press time.

“The benefits we are receiving from Apollo as part of our strategic relationship will substantially enhance returns for our beneficiaries on investment with Apollo,” Joseph Dear, chief investment officer of CalPERS, said in a statement.

Also, Apollo has agreed not to use a placement agent to solicit investment from the firm. The firm agreed to report on a quarterly basis to CalPERS that it has not used a placement agent to secure capital from the pension.

“We recognise that the priorities and strategic interests of CalPERS have evolved under its current leadership, which has sought to lower costs, increase transparency and eliminate the need to use placement agents,” Black said in a statement.