North Dakota State Investment Board, Bismarck, put private equity fund-of-funds manager Adams Street Partners on watch over transparency concerns, said David Hunter, executive director and chief investment officer of the North Dakota Retirement and Investment Office, in an e-mail.
“Over the past several months, staff has spent considerable time and resources working to optimize SIB’s projected private equity portfolio,” said a memo from investment staff prepared for the Oct. 28 board meeting. “As a consequence of these efforts, staff became aware that Adams Street provides different levels of transparency to different types of clients. Clients ‘subject to FOIA or similar laws’ (like the SIB) are provided a redacted reporting package. Adams Street Partners withholds key metrics on the underlying general partners — these metrics include internal rate of return, % drawn, % distributed, money multiples, and Adams Street’s internal manager ratings.”
The memo goes on to state the “reduced transparency” puts the state investment board at a disadvantage to investors who are not subject to open records laws. “Staff is concerned that there exists a class of investors that has privileged information” and can “make “better informed investment decisions,” according to the memo.
The state investment board has invested with Adams Street, or its legacy firm, for more than 20 years. Its commitments over that period total more than $200 million, including a $30 million commitment to Adams Street’s 2016 Global Fund earlier this year. Adams Street is the board’s top-performing private equity manager, Mr. Hunter wrote in his e-mail.
The staff memo notes these transparency concerns have previously been discussed with Adams Street’s legal counsel and that the firm could potentially be replaced.
However, at this time, no replacement search has been recommended or approved and conversations with Adams Street are continuing, Mr. Hunter wrote in his e-mail.
The retirement and investment office oversees the $10.8 billion investment board, which includes pension fund and insurance assets.
"Adams Street Partners has long been a proponent of providing our investors with the highest possible level of reporting transparency,” said T. Bondurant French, executive chairman, at Adams Street Partners, in an e-mailed statement. “At the same time, in order to deliver strong investment performance and provide investors with access to top-tier managers, we sometimes must honor confidentiality agreements with certain general partners. We believe that striking a balance between transparency and access to high-performing managers is the right way to serve our clients."
