COLUMBUS, Ohio — The $15.7 billion Ohio Bureau of Workers' Compensation fund is seeking declaratory relief in the Franklin County Court of Common Pleas on whether to release underlying data on portfolio companies in its $428 million private equity portfolio, said Jeremy Jackson, the fund's chief of marketing.
Officials expect to file the suit within the next two weeks, he said; it would give the board a ruling on what its rights and responsibilities are under the law.
Last week, BWC officials released a report prepared by consultant Ennis Knupp & Associates, Chicago, providing private equity fund performance. Of the 68 private equity funds in its portfolio, two-thirds are losing money. The fund invests in buyout, venture capital and mezzanine funds.
By turning the decision over to the courts, fund officials are delaying a hailstorm of opposition from private equity fund managers opposed to releasing information on the underlying portfolio companies.
Fund officials aren't saying whether they want to release the information. Originally, fund officials approached Ohio Attorney General Jim Petro for a decision on whether the fund could release the information — under Freedom of Information Act requests — on how the private equity managers value their funds. A spokeswoman for Mr. Petro would not say whether he had offered an opinion. Mr. Jackson would only say fund officials spoke with Mr. Petro as well as with the private equity partners of the funds involved.
"It's a struggle to balance the public's right to know vs. our fiduciary responsibility," he said.
The Ohio fund's private equity managers have opposed release of the detailed information, threatening legal action of their own.
In spotlight again
This is the second time in recent months that the fund has been under a spotlight. In November, the board fired its active stock and bond managers. Now, it's changing its asset allocation to one that heavily favors fixed income.
Bureau officials and their new consultant, Wilshire Associates Inc., Santa Monica, Calif., have yet to decide whether to retain private equity as an asset class, Mr. Jackson said.
In the "near term," the board will also decide whether to hold on to its current $428 million in private equity investments and another $404 million in private equity commitments, or sell its current roster of private equity interests on the secondary market, he said.
Among the board's holdings are funds from name-brand private equity firms including Carlyle Group L.P., Washington; HarbourVest Partners LLC, Boston; and Castle Harlan Inc., New York.
The private equity portfolio earned a 3.16% net annualized internal rate of return between its Oct. 1, 1998, inception and March 31, 2005. Its benchmark, the Venture Economics' U.S. Private Equity Performance index, earned a median return of -3.10% for the same period.
Despite outperforming its benchmark, only 21 of 68 funds the Ohio Workers Comp fund invested in have turned a profit.
Among those still in the red, according to the Ennis Knupp report: Carlyle Ventures Partners II, launched in 2001, which returned -7.59%; INVESCO Venture Partnership Fund III, a 2001-2004 fund, which returned -16.26%; and Behrman Capital III, launched in 2000, -2.83%.
"We believe a lot of the funds are immature, given the duration of the entire commitment," Mr. Jackson said. "We expect a lot will come back."