California’s Private Fund Disclosure Bill

California’s soon to be enacted new law, AB 2833, requires every California public investment fund to require its alternative investment vehicle fund managers to make disclosures regarding fees and expenses.

AB 2833 mandates that that every California public investment fund (that includes CalSTRS and CalPERS) must make the following disclosures at least annually:

• The fees and expenses the fund pays directly to the alternative investment vehicle, the fund manager or related parties.
• The fund’s pro rata share of fees and expenses that are paid from the alternative investment vehicle to the fund manager or related parties. In lieu of having the alternative investment vehicle provide this information, the fund may calculate it using information contractually required to be provided by the alternative investment vehicle.
• The fund’s pro rata share of carried interest distributed to the fund manager or related parties.
• The fund’s pro rata share of aggregate fees and expenses paid by all of the portfolio companies held within the alternative investment vehicle to the fund manager or related parties.
• Any additional information already required to be disclosed under the Public Records Act in regards to alternative investments.

The law defines “alternative investment” as “an investment in a private equity fund, venture fund, hedge fund, or absolute return fund.” That leaves me wondering if the term is intended to include real estate funds.

Sources:

• AB-2833 Public Investments Funds Disclosure
• California’s PE fee disclosure bill passes into law by Annabelle Ju in PFM
• CalSTRS Analysis of AB-2833
• Private Equity Funds Balk at Disclosure, and Public Risk Grows by Gretchen Morgenson in the New York Times
• California Fee-Transparency Bill Awaits Governor’s Signature by Dawn Lim in the New York Times

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Phillip Capper from Wellington, New Zealand