Calif. Governor Signs Bill to Boost Pension Fund Fee Disclosure

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By Laura Mahoney

Sept. 15 — Private equity and hedge funds must disclose the fees they charge to California’s public pension funds under a bill signed by Gov. Jerry Brown (D) Sept. 14.

A.B. 2833 by Assemblyman Ken Cooley (D) is intended to boost transparency about investment costs for the California Public Employees’ Retirement System and California State Teachers Retirement System. The new law also applies to city and county retirement systems, the University of California Retirement System and other independent public retirement systems.

State Treasurer John Chiang (D) and the American Federation of State, County and Municipal Employees sponsored the bill.

“Greater transparency in the fees paid to Wall Street will benefit all stakeholders in pension administration--taxpayers, administrators of all public and private pension plans, and all California cities, counties, and state governments and employees,” Chiang said in a Sept. 14 news release.

Annual Disclosure

Under the new law, investment vehicles must tell the pension systems the fees and expenses they charge directly to the systems, other fees the vehicles pay to fund managers such as carried interest, and the gross net rate of return since a vehicle’s inception.

The pension funds must disclose the information in a report presented at a public meeting at least once a year, starting in 2017. The disclosure requirements will be included in all new contracts between the public systems and investment vehicles, and in existing contracts through which the systems make new capital commitments starting Jan. 1, 2017.

According to Chiang’s office, CalPERS disclosed in 2015 that it has paid $3.4 billion in performance fees to equity managers since 1990. The state worker fund has $26.4 billion, or 8.9 percent, of its portfolio invested in private equity. As state treasurer, Chiang serves on the board of directors for CalPERS and CalSTRS.

A.B. 2833 won unanimous votes in the Senate and Assembly to reach Brown’s desk Sept. 2.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at LMahoney@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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