Amended in Assembly April 12, 2016

Amended in Assembly March 28, 2016

Amended in Assembly March 17, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 2833

Introduced by Assembly Member Cooley

February 19, 2016

An act to add Section 7514.7 to the Government Code, relating to retirement.


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, andbegin insert theend insert grossbegin insert and netend insert rate of return in connection with these vehicles and the underlyingbegin delete investmentsend deletebegin insert investments, as well as other specified information,end insert 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:

P2    1


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
2are charged.


SEC. 2.  

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,begin insert at least annually, andend insert on a form prescribed
9by the system:

10(1) Thebegin delete annualend delete fees and expenses that the retirement system
11pays directly to the alternative investmentbegin delete vehicle.end deletebegin insert vehicle, the
12fund manager, or related parties.end insert

13(2) Thebegin delete annualend delete fees and expenses not included in paragraph (1)
14that are paid from the alternativebegin delete investment,end deletebegin insert investment vehicle,end insert
15 including carried interest, to thebegin delete alternative investment vehicle.end delete
begin insert fund manager or related parties.end insert

17(3) Thebegin delete annualend delete fees and expenses paid by the portfolio
18begin delete companiesend deletebegin insert positionsend insert held within the alternative investmentbegin insert vehicleend insert
19 to thebegin delete alternative investment vehicle.end deletebegin insert fund manager or related
20parties.end insert

21(4) The grossbegin insert and netend insert rate of return of each alternative
22investment vehicle since inception.

begin insert

(5) Any additional information described in subdivision (b) of
24Section 6254.26.

end insert

25(b) Every public pension or retirement system, including that
26of the University of California, shall disclose thebegin delete followingend delete
27begin insert information provided pursuant to subdivision (a)end insert at least once
28annuallybegin insert in a report presentedend insert at a meeting open to thebegin delete public:end delete
begin insert public.end insert

begin 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.

end delete
begin delete

33(2) The information described in subdivision (b) of Section

end delete

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
40through whichbegin delete the state or localend deletebegin insert aend insert public pension or retirement
P4    1begin delete systemend deletebegin insert system, including the University of California,end insert invests in
2an alternative investment.

begin insert

(3) “Fund manager” means the general partner, managing
4manager, adviser, or other person or entity with primary
5investment decisionmaking authority over an alternative investment
6vehicle and related parties of the fund manager.

end insert
begin delete


end delete

8begin insert(4)end insert “Carried interest” meansbegin delete aend deletebegin insert anyend insert share ofbegin delete theend delete profitsbegin delete ofend deletebegin insert fromend insert
9 an alternative investment vehicle that isbegin delete dueend deletebegin insert allocatedend insert to a fund
10manager or generalbegin delete partner.end deletebegin insert partner, including allocations of
11alternative investment vehicle profits received by a fund manager
12in consideration of having waived fees that the fund manager might
13otherwise have been entitled to receive.end insert

begin insert

(5) “Portfolio positions” means individual portfolio investments
15made by the alternative investment vehicle.

end insert

16(d) This section shall apply to contracts the system entered into,
17extended, renewed, or amended on or after January 1, 2017.


SEC. 3.  

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.


SEC. 4.  

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.