A California bill that would require greater reporting of alternative investment fees for commitments made on or after Jan. 1 passed the state Legislature on Wednesday.
The bill requires public pension funds to “undertake reasonable efforts” to obtain and disclose the same information for existing alternative investment commitments made before Jan. 1, 2017.
The bill as amended requires all public pension funds in the state to require each alternative investment vehicle in which it invests to disclose the fees and expenses the pension plan pays to the alternative investment vehicle, the fund manager or related parties. California pension plans also need to procure its pro rata share of carried interest, and total fees and expenses paid by all of the fund’s portfolio companies to the fund manager or related parties.
The bill passed the Senate on Aug. 16 and was sent back to the Assembly to consider Senate amendments. (The Assembly originally passed the bill May 31 by a vote of 80-0.) The bill was approved by the Assembly on Wednesday 69-0. It now goes to the governor, who has until Sept. 30 to make a decision. Gov. Edmund G. Brown Jr. has not indicated whether he intends to sign the bill, said Jillena Hernandez, spokeswoman for Assemblyman Ken Cooley, the bill’s author.
The bill also requires public pension funds to ascertain its share of fees and expenses paid by the alternative investment fund to the alternative investment manager or related parties. However, the pension plan can calculate its pro rata share of fees paid by the fund to the fund manager itself rather than seek it from the manager.
Public pension funds must disclose this information publicly at least once a year.
The bill that passed no longer requires disclosure be made on a standardized form.
“Today, California passed a bill that will impose the most robust transparency requirements in the nation with respect to public fund investments in private equity firms,” said California Treasurer John Chiang, who sponsored the bill. “For the first time, taxpayers and pension beneficiaries will get to go behind the curtain to view the previously hidden fees and charges paid to private equity investment companies.”
