The California State Employees’ Retirement System (CalPERS) last week became the nation’s first public pension system to disclose management fees paid to private equity and venture capital partnerships, following the settlement of a lawsuit brought in September by the California First Amendment Coalition (CFAC).
CFAC, a non-profit association of media organizations and related entities, began its pursuit of CalPERS earlier this year, when it requested a wide range of information related to CalPERS’ alternative investment management portfolio. Specifically, it was hoping to uncover the amount of fees paid to partnerships whose members had contributed to the political campaigns of CalPERS officials, including State Treasurer Phil Angelides. When CalPERS refused, CFAC sued.
The settlement agreement, signed November 16, is a bit of a mixed bag for both sides. CalPERS already had a scarlet letter on its back for having published partnership-specific performance data on its Web site, and almost certainly will incur additional LP wrath for this latest disclosure. On the other hand, CalPERS only released hard dollar amounts of its management fee payments, thus partially protecting actual fund terms. It might be possible to derive certain terms through long division, but the inclusion of unspecified “costs” along with the management fees could cause trouble. Carried interest information also was not disclosed, after CalPERS claimed that it did not have sufficient information to provide relevant dollar amounts.
“The CalPERS board was between a rock and a hard place,” said Pat Macht, a CalPERS spokeswoman. “First, we have the desire to publish as much information as we can, but not at the expense of losing investment returns. The way in which this public request came in, it was an overly broad letter, and it would have involved tens of thousands of documents. Also, the information about fees and profits were intertwined. The dilemma was how we should separate the bottom-line info.”
Peter Scheer, executive director of CFAC, added that he was pleased with the settlement, and that it is now the job of “industry analysts and journalists” to examine the data for any political cronyism or mismanagement. When asked if the settlement could decrease CalPERS’ ability to participate in future funds, Scheer said that he did not think so. “Maybe it will be a small problem in the short-term, but almost all of these funds will be wanting to do business with CalPERS in the long-term. There may be a lot of money out there right now, but that won’t always be the case.”
All of the data disclosed by CalPERS as part of the CFAC settlement, as well as a copy of the settlement itself, is available on both the CalPERS and CFAC Web sites.
Separately, Sean Harrigan has been ousted as president of the CalPERS. A grocery union officer and noted corporate reformer, Harrigan lost a 3-2 vote for re-election by the California State Personnel Panel. He issued a statement expressing extreme disappointment.