Apollo’s Epstein report fails to reassure United Nations fund

A report by lawyers for Apollo Global Management into the ties between Leon Black and the late paedophile Jeffrey Epstein is “not enough” to remove the company from a watch list of investments that require extra scrutiny, a top UN pension fund official has said.

The law firm Dechert said last week that Mr Black, Apollo’s co-founder, had transferred $158m to Epstein for tax advice and other professional services, far more than was previously known. The firm found that Apollo did not do business with Epstein and there was “no evidence that Black . . . was involved in any way with Epstein’s criminal activities at any time”.

Apollo was put on the UN Joint Staff Pension Fund’s watch list in July 2019 after reports of Mr Black’s ties to Epstein, a UN official said. The $80.3bn pension fund has invested with Apollo since at least 2013.

Speaking after the Dechert report was published, Pedro Guazo, representative of the UN secretary-general for the investment of the pension fund’s assets, told the Financial Times: “Right now we are not exploring any additional investments with them.”

“The current outlook of the [UN office of investment management] is that the findings of Dechert’s investigation were not enough to move Apollo off the watch list,” he added.

“Reputational risk is something that we take very seriously,” Mr Guazo said, stressing that any new investment would have to meet stringent UN criteria concerning social impact and corporate governance. 

The UN’s decision is a blow to Apollo, whose co-founder Joshua Harris had said in October that “third-party fundraising will slow over the near term as some investors await the findings of the review” by the company’s lawyers.

Apollo last week unveiled reforms designed to address investors’ concerns, saying it would add four new independent directors and revamp its dual-class share structure to give outside investors more say in how the firm is run. Mr Black said he would step down as chief executive by July 31.

“Dechert had unrestricted access to all relevant individuals and documents . . . and the report was publicly released in its entirety,” Apollo said in a statement to the FT.

It added: “The corporate governance enhancements proposed are sweeping and, subject to corporate and regulatory approvals, will be industry leading.”

Those moves appeared to placate some Apollo investors, among them the UK’s South Yorkshire Pensions Authority, which committed almost £29m across three Apollo funds between 2013 and 2019.

The authority’s director, George Graham, told the FT that Apollo’s actions “demonstrate a commitment to learning and improving from things that go wrong”.

Several other pension funds approached by the FT declined to comment on whether they would continue to invest with Apollo.

But the decision by the UN Joint Staff Pension Fund signalled a more cautious approach, and could influence public pension funds and other institutions that contribute to Apollo’s $433bn asset pile.

The Pennsylvania Public School Employees’ Retirement System, which said in October it was not considering any new investments with Apollo, showed no sign of reconsidering its position in the wake of the Dechert review.

“I refer you to our previous comment . . . and decline further comment,” said Steve Esack, a spokesman for the fund.

The $40bn Connecticut Retirement Plans and Trust Funds said it had “reviewed Apollo this spring and determined, based on a variety of due diligence criteria, they did not meet our standards for making a new capital commitment”.

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