The California Public Employees’ Retirement System (CalPERS) last Monday put an end to nearly a year of tensions between itself, private equity fund managers and the media. All 12 members of the CalPERS investment board approved a plan to post performance data on all 250 funds in its $6.7 billion private equity portfolio on the CalPERS Web site by April 30. This includes previously-undisclosed information on 100 venture partnerships held inside three funds-of-funds managed by Wellesley, Mass.-based Grove Street Advisors (See PE Week 3/17/03)
“CalPERS has made a decision to expand its public disclosure of its private equity investments consistent with its overall leadership in the arena of public transparency and corporate governance,” Grove Street Advisors said in a statement to PE Week following the board’s decision. “While we sought to protect the confidentiality of the funds in our portfolio, we will work within our clients’ policies to continue to build an outstanding private equity portfolio for CalPERS.”
After settling a disclosure-related lawsuit with the San Jose Mercury News in December, the Sacramento-based pension fund released both internal rates of return (IRRs) and cash-in/cash-out ratios for all of its private equity holdings, except for those held by Grove Street, while the pension fund’s internal alternative investments staff formulated a permanent disclosure policy.
The Web site will disclose all the performance data, but maintain the privacy of valuations and other financial data of underlying assets like portfolio companies.
Still, it takes at least six clicks to get to the numbers. Users must click through pages that explain the nature of private equity investing, explanations of the J-curve effect, definitions of key terms and a list of private equity fund managers before reaching the actual fund performance data. It then takes another click to see the underlying value of all the funds in Grove Street Advisors’ three funds-of-funds.
Burying the data is a political move on CalPERS’ part: by so thoroughly explaining the risks inherent in its private equity investment strategy, it can fend off accusations that it is making irresponsible, money-losing investments while also providing complete transparency.
It’s a disclosure policy that treads a tricky line between the necessary transparency of a public entity and a fiduciary responsibility to its retirees. Board members Sean Harrigan and Priya Mathur praised the alternative investments team during the meeting for striking that balance.
Fund performance data will be updated quarterly on the site, along with the names on new fund managers and any changes to CalPERS’ alternative investments policies.
Email Carolina Braunschweig