California bill on fee disclosure clears early hurdles

A bill that would require GPs to provide detailed fee information to state pensions has passed the first stage of state scrutiny.

The California State Assembly’s committee for public employees, retirement and social security has unanimously passed a bill requiring private equity firms to disclose detailed fee information to California public pensions.

The seven-member committee passed the bill, which was proposed by assembly member Ken Cooley (D-8th District) in February and is backed by state treasurer John Chiang, on a 7-0 bipartisan vote last week, according to information listed on the California legislative information website.

Cooley is a member of committee which reviewed the bill and decided that it did not require any additional hearings.

The bill now faces scrutiny from the appropriations committee, which will decide whether it makes it to the assembly floor, where it would require a majority vote by the assembly before moving on to the state senate.

The bill has been introduced in the California state legislature in order to “increase the transparency of fees paid” to private equity general partners, Cooley said.

Under the bill, every public pension or retirement system would be required to mandate its private equity fund managers, partnerships, portfolio companies and affiliates to fill out a form including the fees and expenses paid by the pension directly to fund managers; the fees and expenses paid by the fund, including carried interest; and the fees and expenses paid by the portfolio companies to GPs and affiliates, as reported by sister title pfm.

The bill would also require that public pension funds and retirement systems “disclose the information received in connection with the limited partner agreements at least once annually at a meeting open to the public.”

The California Public Employees' Retirement System (CalPERS) that manages $294.34 billion of assets on behalf of over 611,000 beneficiaries has been at the centre of a media storm over lack over transparency on fee payments to private equity. In November, the pension fund reported that it had paid $3.4 billion in fees since 1990 on profits of $24.2 billion, and has rolled out a new private equity monitoring system called PEARS.

California state officials have also been some of the most vocal in the current fee transparency debate. In October, Chiang called on the investment committee chairs Henry Jones at CalPERS and California State Teachers’ Retirement System (CalSTRS) Sharon Hendricks to work with his office to develop state legislation to enforce fee disclosure by private equity firms, as reported by sister title pfm.