CalPERS Working With Other Institutional Investors to Develop Best Practices for Private Equity Information Disclosure

In early July, CalPERS began collecting data on the carried interest it has paid to the private equity firms with which it invests money. The pension fund, like most of its peers, hadn’t previously kept track of that expense.

At a board meeting on Monday, CalPERS CIO Ted Eliopoulos revealed that the country’s largest pension fund is now working with other institutional investors to create a list of “best practices” for disclosure of data to limited partners (pension funds) by general partners (PE firms).

More from the Wall Street Journal:

[CalPERS] has launched talks with other institutional investors to develop best practices regarding what types of information private equity managers should share with limited partners, said Ted Eliopoulos, the pension fund’s chief investment officer [at Monday’s board meeting].

Some forms of fee payments private equity firms receive from the companies they back are particularly controversial. Managers may require the companies they invest in to pay monitoring fees for a set number of years, effectively granting them a guaranteed cash stream, on top of the management fees they already pocket from fund investors. Contracts may dictate portfolio companies pay these fees even when private equity firms sell off their stakes.

“There is not enough disclosure and transparency to the LPs on those cash flows,” Mr. Eliopoulos said during a Calpers‘ investment committee meeting Monday. “Our private equity team is now requiring disclosure of that information for new partnerships going forward.”

Calpers is working with the Institutional Limited Partners Association, a trade organization representing fund investors, to define what kinds of information private equity firms should be willing to disclose, Mr. Eliopoulos said.

It’s interesting news that CalPERS is working with the Institutional Limited Partners Association, because the group counts many heavy-hitters among its membership.

Members include the Canada Pension Plan Investment Board, the Teachers Retirement System of Texas, the Illinois Municipal Retirement Fund, and the City of Philadelphia Board of Pensions and Retirement; as well as officials from corporate pension plans such as Lockheed Martin.

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