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
begin delete investmentsend delete 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, begin delete with other specified information,end delete 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
P3 1trustees 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,
6including that of the University of California, shall require each
7alternative investment vehicle in which it invests to make the
8following disclosures, on a form prescribed
9by the system:
begin delete annualend delete fees and expenses that the retirement system
11pays directly to the alternative investment
begin delete vehicle.end delete
begin delete annualend delete fees and expenses not included in paragraph (1)
14that are paid from the alternative
begin delete investment,end delete
15 including carried interest, to the
begin delete alternative investment vehicle.end delete
begin delete annualend delete
fees and expenses paid by the portfolio
begin delete companiesend delete held within the alternative investment
19 to the
begin delete alternative investment vehicle.end delete
21(4) The gross rate of return of each alternative
22investment vehicle since inception.
25(b) Every public pension or retirement system, including that
26of the University of California, shall disclose the
begin delete followingend delete
27 at least once
28annually at a meeting open to the
begin delete public:end delete
30(1) The information received pursuant to subdivision (a). The
31disclosure of this information shall be consistent with the
32restrictions described in subdivision (a) of Section 6254.26.
33(2) The information described in subdivision (b) of Section
35(c) For purposes of this section:
36(1) “Alternative investment” means an investment in a private
37equity fund, venture fund, hedge fund, or absolute return fund.
38(2) “Alternative investment vehicle” means the limited
39partnership, limited liability company, or similar legal structure
begin delete the state or localend delete public pension or retirement
begin delete systemend delete invests in
2an alternative investment.
8 “Carried interest” means
begin delete aend delete share of begin delete theend delete profits begin delete ofend delete
9 an alternative investment vehicle that is
begin delete dueend delete to a fund
10manager or general
begin delete partner.end delete
16(d) This section shall apply to contracts the system entered into,
17extended, renewed, or amended on or after January 1, 2017.
The Legislature finds and declares that Section 2 of
19this act, which adds Section 7514.7 to the Government Code,
20furthers, within the meaning of paragraph (7) of subdivision (b)
21of Section 3 of Article I of the California Constitution, the purposes
22of that constitutional section as it relates to the right of public
23access to the meetings of local public bodies or the writings of
24local public officials and local agencies. Pursuant to paragraph (7)
25of subdivision (b) of Section 3 of Article I of the California
26Constitution, the Legislature makes the following findings:
27The information in the disclosures required under subdivisions
28(a) and (b) of Section 7514.7 of the Government Code is necessary
29to ensure public confidence in the integrity of investments made
30by retirement boards pursuant to alternative investment vehicles.
No reimbursement is required by this act pursuant to
32Section 6 of Article XIII B of the California Constitution because
33the only costs that may be incurred by a local agency or school
34district under this act would result from a legislative mandate that
35is within the scope of paragraph (7) of subdivision (b) of Section
363 of Article I of the California Constitution.