AB 2833, as amended, Cooley. Public retirement systems: funds: disclosures.
The California Constitution commits to the retirement board of a public pension or retirement system plenary authority and fiduciary responsibility for investment of moneys and administration of the system. Existing law requires a retirement board to develop and implement a policy requiring disclosure of payments to placement agents, as defined, in connection with system investments in or through external managers that includes prescribed elements. Existing law requires disclosure of campaign contributions or gifts made by a placement agent to any member of a public pension retirement board, as specified. Existing law requires a public retirement system to obtain an actuarial valuation of the system not less than triennially and submit audited financial statements to the State Controller who then publishes a report on the financial condition of public retirement systems.
This bill, for contracts entered into on and after January 1, 2017, would require a public pension or retirement system, including that of the University of California, to require alternative investment vehicles, as defined, to make specified disclosures regarding fees, expenses, and gross rate of return in connection with these vehicles and the underlying investments on a form prescribed by the system. Consistent with requirements relating to public records, the bill would require a public pension or retirement system, including that of the University of California, to disclose the information received in connection with alternative investment vehicles, with other specified information, at least once annually at a meeting open to the public. The bill would make a statement of legislative intent. Because this bill would impose new requirements on local entities relating to the collection of information and its presentation at an open meeting, it would impose a state-mandated local program.
The California Constitution requires local agencies, for the purpose of ensuring public access to the meetings of public bodies and the writings of public officials and agencies, to comply with a statutory enactment that amends or enacts laws relating to public records or open meetings and contains findings demonstrating that the enactment furthers the constitutional requirements relating to this purpose.
This bill would make legislative findings to that effect.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.
The people of the State of California do enact as follows:
It is the intent of the Legislature in enacting this
2section to increase the transparency of fees paid by public pension
3funds to alternative investment vehicles. Pension funds pay
4significant fees to alternative investment vehicles and do not have
5sufficient information regarding the character and amount of those
6fees. As fiduciaries, public fund trustees have a duty to maximize
7investment returns in order to ensure promised benefits are
8adequately funded and to minimize taxpayer costs. Because fees
9paid to alternative investment vehicles reduce returns, public fund
10trustees need to be able to see and understand all of the fees they
Section 7514.7 is added to the Government Code, to
(a) Every public pension or retirement system,
4including that of the University of California, shall require each
5alternative investment vehicle in which it invests to make the
6following disclosures, on a form prescribed by the system:
7(1) The annual fees and expenses that the retirement system
8pays directly to the alternative investment vehicle.
9(2) The annual fees and expenses not included in paragraph (1)
10that are paid from the alternative investment, including carried
11interest, to the alternative investment vehicle.
12(3) The annual fees and expenses paid by the portfolio
13companies held within the alternative investment to the alternative
15(4) The gross rate of return of each alternative investment
16vehicle since inception.
17(b) Every public pension or retirement
system, including that
18of the University of California, shall disclose the following at least
19once annually at a meeting open to the public:
20(1) The information received pursuant to subdivision (a). The
21disclosure of this information shall be consistent with the
22restrictions described in subdivision (a) of Section 6254.26.
23(2) The information described in subdivision (b) of Section
25(c) For purposes of this section:
26(1) “Alternative investment” means an investment in a private
27equity fund, venture fund, hedge fund, or absolute return fund.
28(2) “Alternative investment vehicle” means the limited
29partnership, limited liability company, or similar legal structure
30through which the state or local public pension or retirement system
31invests in an alternative investment.
32(3) “Carried interest” means a share of the profits of
33alternative investment vehicle that is due to a fund manager or
35(d) This section shall apply to contracts the system entered into,
36extended, renewed, or amended on or after January 1, 2017.
The Legislature finds and declares that Section
begin delete 1end delete of
38this act, which adds Section 7514.7 to the Government Code,
39furthers, within the meaning of paragraph (7) of subdivision (b)
40of Section 3 of Article I of the California Constitution, the purposes
P4 1of that constitutional section as it relates to the right of public
2access to the meetings of local public bodies or the writings of
3local public officials and local agencies. Pursuant to paragraph (7)
4of subdivision (b) of Section 3 of Article I of the California
5Constitution, the Legislature makes the following findings:
6The information in the disclosures required under subdivisions
7(a) and (b) of Section 7514.7 of the Government Code is necessary
8to ensure public confidence in the integrity of investments made
9by retirement boards pursuant to alternative investment vehicles.
No reimbursement is required by this act pursuant to
11Section 6 of Article XIII B of the California Constitution because
12the only costs that may be incurred by a local agency or school
13district under this act would result from a legislative mandate that
14is within the scope of paragraph (7) of subdivision (b) of Section
153 of Article I of the California Constitution.