New York fires infra manager; manager dissolves fund

Four pensions of the New York City public pension system terminated their investments in an infrastructure fund run by a rock salt company executive and the fund, the Emerald Infrastructure Development Fund, has now been dissolved.

“During the initial investment period the manager was unable to find acceptable investments on behalf of the systems,” the pension system wrote in a letter provided by Office of the Comptroller. “Rather than extend the investment period, the Boards chose to terminate the relationship,” the letter continued.

The manager relationship is one of six relationships the $102 billion pension system has terminated this year for poor performance, according to the records access officer who provided the letter.

The relationship was terminated in February of this year, according to the letter, after the city’s pensions had paid Emerald $2.9 million in fees and expenses on a total commitment of $75 million.

The New York City pensions’ relationship with Emerald began in April 2008. Then-Comptroller Bill Thompson announced an “unprecedented” $150 million commitment in the Emerald Infrastructure Development Fund. A press release from his office called it “the largest ever public investment from the United States in Northern Ireland”.

“Based on vigorous assessment by our investment consultants, we are confident that there is great potential for long-term investment success in the region,” Thompson said in the press release.

One of the consultants involved in setting up the deal was William Howell. Emerald named him on a regulatory filing with the Securities and Exchange Commission in October 2009. Howell collected placement fees of two percent of the $75 million committed by the New York City pensions, or $1.5 million.

A May 2009 investigation by the Village Voice identified Howell as a friend of Thompson’s who frequently helped to arrange deals between the city’s pensions and investment managers. The alleged relationship could not be independently verified by Infrastructure Investor. 

But placement agent disclosure letters obtained from the Comptroller’s office under a freedom of information request showed that Howell’s placement firm, Shelbourne Securities, helped place at least one more fund with the system: NGN Capital’s NGN Biomed Opportunity II fund.

Calls to Shelbourne Securities were answered by an automated message that said “the number you have dialed is not in service”.

A spokesperson for Emerald said in an email the firm received notice in January from the Office of the Comptroller that the pensions that had invested in Emerald Infrastructure Development Fund had elected to dissolve the fund. Emerald complied with the request and dissolved the fund.

“Our goal from the start was to find the right investments that would provide an acceptable risk-adjusted return for our investors. During the shortened initial investment period, market conditions were such that we were not able to do so and we understand that was the pension fund's reason to dissolve the fund,” the spokesperson said.

The fund closed in September 2008 on an undisclosed amount, according to the letter from the comptroller’s office. However, in October 2008 it made its initial filing with the Securities and Exchange Commission saying it had raised $75 million toward a target of $750 million.

But while the Emerald Infrastructure Development Fund has been dissolved, the fund’s management company, Emerald Development Managers, will remain open. “We believe there are many opportunities for the type of projects we have been working on,” the spokesperson said.

Emerald’s website said only that the firm “invests in well-structured, risk-mitigated projects in infrastructure and related sectors in Northern Ireland/Republic of Ireland and “green” energy in North America”.

Emerald never made any investments on behalf of the New York City pensions, according to the letter provided by the comptroller’s office.

The firm’s incorporation articles filed in Northern Ireland in January 2008 say “the company’s objects” are, among others, “to carry on the business of dealers in and manufacturers and processes of natural minerals and substances (whether animal, vegetable or mineral).”

Neil Cohen, the head of Emerald Infrastructure Developers, is also the co-founder and co-chief executive officer of the American Rock Salt Company, a New York-based provider of de-icing salt.

The four pensions that had invested in the fund were the New York City Employees’ Retirement Systems, at $25 million, Teachers’ Retirement System of the City of New York, at $20 million, the New York City Police Pension Fund, at $20 million, and the New York City Fire Department Pension Fund, at $10 million, according to pension document provided under the freedom of information act.

Each of the four pensions’ investments showed a negative market value as of 31 March, 2009, according to the document.