The state of Massachusetts last month released IRR-performance data for 103 private equity partnerships that received investment dollars from its state retirement system (MassPRIM) between the years of 1986 and 1998.
The move is the latest salvo in a disclosure battle than began more than two years ago, when The Boston Globe first requested that MassPRIM disclose fund-specific performance information from its private equity portfolio. The request and subsequent inquiries from the Globe, Boston Herald, Boston Business Journal and several individuals had been supported by state Attorney General Tom Reilly, but were rebuffed by Treasurer Tim Cahill.
State legislators earlier this year approved a measure to preclude MassPRIM from disclosing any investment information, if such a release were deemed “likely to impair the government’s ability to obtain such information in the future” or “likely to cause substantial harm to the competitive position of the person or entity from whom the information was obtained.” The bill was interpreted to include IRR information on private equity funds, since some firms like Sequoia Capital have refused to allow disclosure-friendly public institutions into new funds. Massachusetts Governor Mitt Romney, former head of Bain Capital, vetoed the measure in late June, but had his veto overridden one month later.
So why did MassPRIM release information when it was under no legal obligation to do so? “We are trying to find the fine line between fiduciary responsibility and our additional responsibility as a public pension fund,” explains Doug Rubin, first deputy treasurer under Cahill. That line, Rubin says, includes a pledge to not disclose any information on funds raised within the past five years. Such funds are believed by Rubin and others to be immature, and particularly susceptible to performance distortion due to J-curve vagaries.
MassPRIM also did not disclose any vintage year or cash-in/cash-out information on its funds, but Rubin does not rule out the possibility of that information being released in the future. “It is a learning process for us right now,” he says.
Most of MassPRIM’s partnership investments between 1986 and 1998 were into buyout funds, according to the recently-released data. Its top-performing buyout fund investments include Clayton & Dubilier Private Equity Fund II, which had an IRR 63.87% and Permira Europe I, which achieved a 74.81% IRR, according to MassPRIM’s data. Other funds that received investments from MassPRIM include Thomas H. Lee Partners debut fund, as well as other offerings from Kohlberg Kravis Roberts & Co. and Forstmann Little & Co.