The Board of Administration of the California Public Employees’ Retirement System (CalPERS) Board agreed to settle the lawsuit filed by the San Jose Mercury News, with entry of a stipulated judgment, subject to the following terms and conditions:

CalPERS said it will release internal rate of return (IRR) performance data for each of the pension fund’s private equity funds, including the date the investment was made and the capital that has been given to the private equity fund and the cash returned to the System in the form of profits.   CalPERS said it would release this data for the quarters ended June 30, September 30, and December 31, 2002, as well as March 30, 2003

However, under terms of the settlement, CalPERS will not release portfolio company information.

Claim Withdrawal

In exchange, the San Jose Mercury News will withdraw all claims against the pension fund.   Upon the trial court’s entry of a stipulated judgment, CalPERS will release the data to the public and post it on its web site at www.calpers.ca.gov

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In October the San Jose Mercury News sued CalPERS for access to performance information on the fund’s private investments, claiming the state’s taxpayers and public employees had a right to know.   Although previously available from CalPERS, the fund refused the request under the state’s Public Records Act, saying that such data now would “offend the firms it invests in”, and therefore hurt CalPERS’ investor status.  

Back “Tracking”

Last month, California State Judge James Robertson said the information was not a trade secret, and ruled that CalPERS’ internal grading of funds, how they are performing relative to expectations, could also be disclosed, but that the names of specific funds and valuations did not have to be disclosed (see  CalPERS Must Disclose VC Information ).  

Earlier this month the California State Teachers’ Retirement Fund (CalSTRS) decided to release the performance results of the venture capital and other private funds in which it invests.   The nation’s third largest pension fund said it disclosed investment returns – known as internal rates of return, which CalSTRS calculates on its own – for 64 of about 126 private equity funds in its $91 billion portfolio.   The fund had sought waivers from the confidentiality agreements it signed with fund managers – and only released information for those investments where the general partners approved (see  CalSTRS Goes Public with Private Equity Returns ).

“Ending this lawsuit frees us to work proactively on developing an industry standard for private equity reporting that allows us to do our fiduciary duty and provide maximum transparency,” said William D. Crist, president of CalPERS Board of Administration.   “We intend to work with other institutional investors, the private equity industry, and the public to develop the best reporting standards.   The goal of these standards is to meet the needs of public disclosure without creating a chilling effect on our ability to access and evaluate private equity investments.”

CalPERS’ investment staff is scheduled to report back to the System’s Investment Committee at its March 17, 2003, meeting with recommendations for future public reporting of the System’s private equity investments (see  CalPERS to Provide Private Equity Info ).