Copyright 2004, Wall Street Journal

Calpers to Disclose Fees Paid, Returns Made on Its Investments

(Wall Street Journal 12/8/04) -- California public retirees for the first time will be able to see how much the nation's largest pension fund is paying in fees to individual private-equity funds and how much profit or loss each of those funds is generating annually, under terms of a legal settlement reached yesterday.

In response to a lawsuit filed by a First Amendment rights group, the California Public Employees' Retirement System, or Calpers, agreed to disclose how much it has paid annually from 2001 to 2005 in fees and costs to private-equity firms. Under the settlement, Calpers is preparing spreadsheets that reflect the annual amounts of the profit that it has received from each fund during 1999-2005.

The settlement is the latest win for open-records advocates who are seeking greater disclosure of performance and investment data from private-equity firms, which are resisting the push.

"We think the case goes a long way to making available to taxpayers and pensioners in California the kind of information they need to judge for themselves whether Calpers is getting a good return on their money," said Peter Scheer, executive director of the California First Amendment Coalition. His group filed the suit in September in California Superior Court in San Francisco, based on the state's open-records laws.

Calpers general counsel Peter Mixon said the settlement "strikes the appropriate balance between the public's right to access information and the continuing ability of Calpers to invest in these asset classes, which generate long-term returns to pay benefits."

Calpers pays about $200 million annually in costs and fees to about 300 private-equity firms, including hedge funds and venture-capital firms, according to spokeswoman Patricia K. Macht. Calpers has committed $21.1 billion out of its systemwide assets of $178 billion to private equity since 1990, and $2 billion to hedge funds since that investment program began in 2002. Calpers has generated profits in excess of $6 billion in private equity and posted gains of $93 million from hedge funds, Ms. Macht said.

But profit/gain information released by the coalition for the years 1999 to 2003 show many funds have yet to move into the black, including the vast majority of the hundreds of venture-capital investments made during the technology boom. Calpers spokesman Brad Pacheco said, "We expect to see more of the funds realize a profit in the future, we realize they are in their early life cycle."

By Ann Grimes