Adams Street, North Dakota squabble over transparency

Adams Street Partners landed on a watch list for North Dakota Retirement and Investment Office over concerns the funds-of-funds manager wasn’t being transparent, state pension documents show.

Its time on the watch list may be short.

“We had a little misunderstanding that we’ve verbally worked out,” Executive Director and Chief Investment Officer David Hunter told Buyouts. “I think we’ll get a lot more detail, and that’s great.”

North Dakota’s holdings in Adams Street funds include commitments to private equity firms that required Adams Street sign a confidentiality agreement, which limits the amount of information it could then provide to the state’s pension.

When the state’s pension system sought more information about those holdings, as it prepared to expand its PE portfolio, Adams Street expressed concern that the state’s confidentiality provisions wouldn’t protect nonpublic information from state open-records requests.

Release of certain information would have put Adams Street at odds with its general partners, Hunter said. Shortly afterward, North Dakota staff reported that “Adams Street is reducing the information that was previously provided to RIO personnel,” minutes of the State Investment Board’s Oct. 28 meeting say.

The board promptly voted to put Adams Street on its watch list and to “pause” future investments with the firm, according to state documents.

The move would have significantly set back the revival of North Dakota’s PE portfolio. Adams Street manages roughly 20 percent of the pension system’s allocation to the asset class, and the state planned to build on that relationship by committing as much as $100 million each year across funds managed by Adams Street and BlackRock over the next several years, Buyouts reported in July.

In the two weeks following the State Investment Board’s vote, staff and Adams Street discussed curating a modified reporting package that will include portfolio-company-level information, Hunter said.

Certain Adams Street GPs might be exempted from the report, but “we’ll probably get the vast majority” of the information North Dakota originally sought, Hunter said. “It will include more line-level detail than it previously reported.”

“Adams Street Partners has long been a proponent of providing our investors with the highest possible level of reporting transparency,” Executive Chairman T. Bondurant French told Buyouts in a writtten statement.

“At the same time, in order to deliver strong investment performance and provide investors with access to top-tier managers, we sometimes must honor confidentiality agreements with certain general partners. We believe that striking a balance between transparency and access to high-performing managers is the right way to serve our clients.”

North Dakota investment staff urged the board to remove Adams Street from its watch list upon receipt of the modified investment report for two consecutive quarters, pension documents show.

While Adams Street’s compliance with the updated reporting requirements remains to be seen, Hunter said he’s certain the firm will comply. “We have a 25-year relationship with them,” he said, adding: “They’re our best performing private equity manager.”