One of the most powerful gatekeepers in the U.S. pension industry has walked away from the gate. For close to a quarter century, Wilshire Associates' longtime consulting chief, Stephen Nesbitt, advised giant pension funds, including the California Public Employees' Retirement System and Massachusetts' Pension Reserves Investment Management Board, on which asset managers to hire. He also ran Wilshire's $10 billion asset management business.
Forced by reorganization at the firm to give up consulting and focus on his money management role, Nesbitt decided instead to resign, say sources at Wilshire. He thus becomes the first collateral casualty of the Securities and Exchange Commission's two-month-old probe into potential conflicts of interest at pension consulting firms.
Neither Nesbitt nor Santa Monica, Californiabased Wilshire has been accused of any wrongdoing. Nevertheless, Wilshire chairman Dennis Tito decided to take preemptive action by separating the firm's consulting activities from its asset management business. Nesbitt straddled both; Tito replaced him as consulting chief with Wilshire veteran Julia Bonafede but offered him the chance to remain head of asset management. Apparently chagrined about losing the consulting brief, Nesbitt resigned. He would not comment. Tito declared in a written statement that "Steve was offered the opportunity to move from his position as head of the consulting division to head up the funds management division but declined."
Wilshire is just one of several major investment consulting firms, including Mercer Investment Consulting and Frank Russell Co., that have received inquiries from the SEC. The agency wants to know whether they receive compensation from the money managers that they recommend to pension plans.
Nesbitt's contemporaries at other consulting firms speculate that he will start his own consulting practice, perhaps with two other ex-Wilshire consultants who left after he did: Dennis Sugino and Kathy Barchick. Certainly, he's got something to say about how to handle an SEC probe.