Colorado PE Bill to Protect Valuation Disclosures

April 5, 2004 ( - Colorado Governor Bill Owens is poised to ink a bill that would protect portfolio company valuations from disclosure.

Expected to be signed into law next week, the bill will forbid the state’s treasurer and public pension funds from disclosing any information that might affect the value of a private equity investment, according to a report in Private Equity Week. Any portfolio company information that sways a fund’s value would be off limits.

“Things like a private company’s plans or its prototypes will be kept confidential because it’s proprietary and not in the public arena, ” Katie Kaufmanis, director of communications for the Colorado Public Employees’ Retirement System (CoPERA), told the publication. CoPERA manages a $2.6 billion private equity portfolio.

What will remain available for public consumption is the amount of capital an investor such as CoPERA commits to a fund, what distributions it has received and the fund’s internal rates of return. CoPERA already publishes that information on its Web site.

According to the news report, Colorado appears to be reacting to moves by at least three venture firms to kick out or exclude public limited partnerships – similar to CoPERA – from their funds.Among the firms that have not allowed public limited partnerships in their recent funds are Charles River Ventures, Sequoia Capital and Woodside Fund.

“[Initial returns] for early-stage companies look terrible, and they’re not terribly helpful in evaluating a private equity fund’s performance,” said John Garrett, a managing director with Meritage Private Equity Funds in Denver. “Premature reporting of portfolio company information will affect private equity investment in a bad way and discourage investment in early-stage funds because of the adverse political consequences of holding an early-stage company that has no revenue and an operating loss.”

The bill will write into law what San Francisco Superior Court Judge James Robertson mandated when he ordered the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to open their books, following a Freedom of Information Act suit filed by the San Jose Mercury News in November 2002 (See  CalSTRS Goes Public with Private Equity ReturnsCalPERS to Go Public With Private Equity Info ).