Romney Expected to Veto VC Pension Legislation

June 25, 2004 (—Massachusetts Governor Mitt Romney is expected today to veto legislation that would hide information regarding the amount of money the state pension fund invests in venture capital and other private funds, according to a report in the Boston Globe.

The legislative initiative was sponsored by state Treasurer Timothy Cahill, who is also chairman of the pension board, and is part of the state budget that the state legislature passed last week.   Cahill sponsored the bill because he wanted to protect venture capital companies’ interest in the pension fund.   He thinks that if all the information surrounding the venture capital funds is made public, the state pension system will lose venture capital firms’ cooperation, and this could hurt the pension system, the Globe reported.    However, Cahill has said that performance returns on funds at least five years old could be released to the public.

The legislation expected to be vetoed by Romney, who himself, made much money through a venture capital firm, would haveallowed the pension agency to withold secret financial information “if disclosure is likely to impair the government’s ability to obtain such information in the future or is likely to cause substantial harm to the competitive position of the person or entity from whom the information was obtained,” the Globe said.

Usually, the public does not have access to information detailing the investment performance of venture capital funds; the information is usually only made available to current and potential investors.   Public pension funds however, are subject to state public disclosure laws, and for those investing in venture capital, there is tension surrounding the issue of disclosure.

Currently, approximately 6% ofthe $32 billion state fund is invested in 170 private equity funds, managed by 80 different firms. Additionally, the fund is going to invest $1.6 billion in hedge funds, another investment not subject to public disclosure, according to the Globe.

The nation’s largest public pension fund, CalPERS, late last year decided to release performance information on the private equity investments of the fund. 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 asMarch 30, 2003(see  CalPERS to Go Public With Private Equity Info ).