A CalPERS-backed state assembly bill that would have kept certain information and documents related to its private debt investments secret failed to pass the state Senate Judiciary Committee, killing the bill.
The bill would have exempted certain private lending-related documents and information from California's public disclosure laws, according to a July 11 analysis of the amended version of the bill by the Senate Judiciary Committee.
Officials at the $459 billion California Public Employees' Retirement System, Sacramento, are evaluating their next steps, which could include making what would be a third attempt to get a bill passed, CalPERS spokeswoman Megan White said in an email.
CalPERS wanted the legislation so that staff could make private debt investments and manage them in-house. CalPERS needs the exemption to be competitive with other private debt market participants, CalPERS interim CIO, Dan Bienvenue previously told Pensions & Investments.
By making such information public, CalPERS officials believe it would be difficult to attract "worthwhile private debt borrowers," the analysis said.
Pension fund officials will continue to invest in private debt through external managers, Danny Brown, chief of CalPERS' legislative affairs division, told the CalPERS board Wednesday.
Opponents of the bill, which included retiree organizations, principally the Retired Public Employees Association; certain environmental groups; the City of Pasadena; and the Howard Jarvis Taxpayers Association, argued that the bill would not provide adequate public information, according to the Senate Judiciary Committee analysis. California's public disclosure law already exempts "alternative investments," meaning investments in private equity funds, venture capital funds, hedge funds or absolute return funds, including proprietary due diligence materials and investment agreements, from being made public, the analysis said.
The Retired Public Employees Association unsuccessfully asked that the bill be amended to make the loan agreements public. CalPERS would not accept that amendment, Mr. Brown said Wednesday, which was the third day of the board's virtual offsite meeting.
Staff estimates that external management of private debt would cost $150 million in management and incentive fees for each $1 billion invested with an external manager over a five-year period, Ms. White said.
But for CalPERS to internally make and manage private debt investments, pension officials would have to "build out a team," which also would carry a cost, Mr. Bienvenue said.
CalPERS board Vice President Theresa Taylor on Wednesday questioned whether CalPERS could create an asset allocation that would meet its expected 7% rate of return without the ability to invest in private debt in-house.
Separately, the board plans to hold its next board and committee meetings, scheduled for Sept. 13, 14 and 15, in person, board President Henry Jones indicated Wednesday.