as amended, Cooley. Public
begin delete retirement systems:end delete 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
begin delete pension or retirement system, including that of the University of California,end delete to require alternative investment vehicles, as defined, to make specified disclosures regarding fees, expenses, and begin delete the gross and net rate of returnend delete in connection with these vehicles and the underlying investments, as well as other specified begin delete information, on a form prescribed by the system.end delete Consistent with requirements relating to public records, the bill would require a public begin delete pension or retirement system, including that of the University of California,end delete to disclose the information received in connection with alternative investment begin delete vehicles,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
begin delete pensionend delete
3 funds to alternative investment vehicles.
begin delete Pensionend delete funds pay significant fees to alternative investment
5vehicles and do not have sufficient information regarding the
6character and amount of those fees. As fiduciaries, public
7 fund trustees have a duty to maximize investment
8returns in order to ensure promised benefits are adequately funded
9and to minimize taxpayer costs. Because fees paid to alternative
10investment vehicles reduce returns, public fund trustees
11need to be able to see and understand all of the fees they are
Section 7514.7 is added to the Government Code, to
(a) Every public
begin delete pension or retirement system, shall
16including that of the University of California,end delete
17require each alternative investment vehicle in which it invests to
18make the following
begin delete disclosures, at least annually, and on a form
19prescribed by the system:end delete
20(1) The fees and
expenses that the
begin delete retirement systemend delete pays directly to the alternative investment vehicle,
22the fund manager, or related parties.
23(2) The fees and
24expenses not included in paragraph (1) that are paid from the
begin delete vehicle, including carried interest,end delete
26 to the fund manager or related parties.
37 fees and expenses paid by the portfolio
begin delete positionsend delete
P4 1 held within the alternative investment vehicle to the fund manager
2or related parties.
3(4) The gross and net rate of return of each alternative
4investment vehicle since inception.
5(5) Any additional information described in subdivision (b) of
7(b) Every public
begin delete pension or retirement system, including that shall disclose the
8of the University of California,end delete
9information provided pursuant to subdivision (a) at least once
10annually in a report presented at a meeting open to the public.
18(c) For purposes of this section:
19(1) “Alternative investment” means an investment in a private
20equity fund, venture fund, hedge fund, or absolute return fund.
21(2) “Alternative investment vehicle” means the
22partnership, limited liability company, or similar legal structure
23through which a public
begin delete pension or retirement system, including invests in an
24the University of California,end delete
26(3) “Fund manager” means the general partner, managing
27manager, adviser, or other person or entity with primary investment
28decisionmaking authority over an alternative investment vehicle
29and related parties of the fund manager.
30(4) “Carried interest” means any share of profits from
31alternative investment vehicle that is
begin delete allocatedend delete to a fund
begin delete manager orend delete general partner, including
33allocations of alternative investment vehicle profits received by a
34fund manager in consideration of having waived fees that
begin delete the fund might
otherwise have been entitled to receive.
begin delete positions”end delete means individual portfolio
37investments made by the alternative investment vehicle.
32(d) This section shall apply to contracts the
begin delete system on or after January 1,
33entered into, extended, renewed, or amendedend delete
begin delete 2017.end delete
The Legislature finds and declares that Section 2 of
4this act, which adds Section 7514.7 to the Government Code,
5furthers, within the meaning of paragraph (7) of subdivision (b)
6of Section 3 of Article I of the California Constitution, the purposes
7of that constitutional section as it relates to the right of public
8access to the meetings of local public bodies or the writings of
9local public officials and local agencies. Pursuant to paragraph (7)
10of subdivision (b) of Section 3 of Article I of the California
11Constitution, the Legislature makes the following findings:
12The information in the disclosures required under subdivisions
13(a) and (b) of Section 7514.7 of the Government Code is necessary
14to ensure public confidence in the integrity of investments made
15by retirement boards pursuant to alternative investment vehicles.
No reimbursement is required by this act pursuant to
17Section 6 of Article XIII B of the California Constitution because
18the only costs that may be incurred by a local agency or school
19district under this act would result from a legislative mandate that
20is within the scope of paragraph (7) of subdivision (b) of Section
213 of Article I of the California Constitution.