CalPERS sued to disclose management fees

The California pension giant has been sued by a non-profit group to reveal how much it pays in fees to private equity firms.

The California Public Employees’ Retirement System is being sued by a public-disclosure advocacy group to reveal the fees it pays to private equity firms.


A lawsuit filed in Superior Court in San Francisco follows a disclosure request the group, California First Amendment Coalition, made in May seeking the same information. CalPERS refused the request.


In a Wall Street Journal article, Peter Scheer, executive director of California First Amendment, said CalPERS’ constituents “can’t tell whether CalPERS is getting a good deal, a bad deal, or whether they are paying too much.”


CalPERS, which now releases fund IRR data on its private equity portfolio following similar lawsuits, released a statement on this most recent transparency-related dispute. Pension chief investment officer Mark Anson said in the statement: “State law protects disclosure of information that is critical to protecting our ability to generate returns for the pension fund so that the taxpayers won’t have to pay higher contributions toward public employee pensions.”


Anson noted that CalPERS has an “outstanding” record on public disclosure and that it already discloses total private equity fees in its annual report. The lawsuit puts the pension’s annual alternative investment management fees at $500 million (€415 million).


Anson warned in the pension’s statement that disclosing the fees would threaten CalPERS’ ability to generate returns through a private equity program. “In addition, CalPERS may be forced to withdraw prematurely from funds.”


Last month, CalPERS announced a 16.7 percent return on its investments for the one-year period ended in June, increasing the value of its current portfolios by $22.7 billion.


The assets of CalPERS’ Alternative Investment Management Program, which specialises in private equity, saw a reported increase of 12.7 percent, exceeding its 9.7 percent benchmark, according to a statement. For the 2003 to 2004 fiscal year, the private equity program earned $1 billion in profits. Since its inception in 1990, the private equity arm has garnered CalPERS $6 billion.


Also last month, the pension announced the appointment of Leon Shahinian as senior investment officer for its alternative investment programme. He replaces Rick Hayes, who left last month to become a managing partner at Oak Hill Capital Management, the New York-headquartered alternative asset specialist.


According to its website, San Rafael-based California First Amendment was founded in 1988. It built financial support through “media contributions.” It receives legal help from the Oakland law firm of Crosby, Heafey, Roach & May.