State of Illinois Joins Battle Over Disclosure –

Summer vacation has begun for Illinois legislators, leaving a private equity-related fund disclosure bill hanging in limbo until November.

Illinois’ proposal (House Bill 5252) is similar to legislation passed by Colorado in April, which makes a private equity fund’s performance numbers available for public consumption, but would not subject details about the fund’s underlying assets to Freedom of Information Act (FOIA) requests.

Although the Illinois bill failed to pass before the state’s General Assembly went home for the summer, it could become law during a special legislative veto session that begins in November. Any bill that’s already been introduced during the General Assembly’s regular session can be signed into law during that special session.

If the effort fails again in November’s special session, the measure will likely be introduced for the third year in a row when a new session begins in January, says a spokesperson for Rep. Kurt Granberg, the Democrat and House Assistant Majority Leader who introduced the bill.

Backed by the Illinois Venture Capital Association (IVCA) and the state’s pension funds, the bill was expected to be on the desk of Gov. Rod Blagojevich and to be signed into law before the end of summer or early fall if all went according to plan. No action had been taken as of the beginning of August.

Illinois lawmakers tried to pass similar legislation last year, but the governor refused to sign it and asked that the bill’s language be reworked. This time around, lawmakers expect to be successful in writing the FOIA exceptions into law, says Penny Cate, acting executive director of the IVCA.

Rep. Kurt Granberg, a Democrat and Assistant Majority Leader, introduced the bill on behalf of Mike Noonan, director of governmental affairs for the law firm of Greenberg & Traurig in Chicago. It passed through the state’s House of Representatives and has been working its way though the state Senate since May.

Supporters argue that legislation is the only way to protect public pension funds from being left out of various investment funds. Increasingly, fund managers are booting out public LPs or not inviting them into new funds.

For instance, despite a 12-year relationship, Sequoia Capital blocked the University of Michigan from investing in its eleventh fund, after the school was hit with a FOIA request and forced to disclose performance numbers for the firm’s earlier funds. Similarly, Charles River Ventures and Sevin Rosen Funds also blocked public institutions from investing in their fund-raising efforts earlier this year because institutional investors could not guarantee that fund returns would remain confidential.

The $12.5 billion State University Retirement System of Illinois is supporting the bill for fear that it will be locked out of competitive top-performing private equity funds in the future.

The Teachers’ Retirement System of the State of Illinois has also come out in favor of it. In May, the $31.5 billion pension fund said it would add as much as $400 million to it $779 million private equity portfolio over the next 12 months.

– Carolina Braunschweig

CalSTRS Posts Gains

For the second year running, the California State Teachers’ Retirement System (CalSTRS) posted gains for its $116 billion investment portfolio, setting a positive tone for the pension fund as it enters a new fiscal year.

Overall, the pension fund’s value jumped 17.4% during the 2003-04 fiscal year. As of June 30, its private equity portfolio was valued at $5.4 billion, a 29.6% year-over-year gain.

With the start of a new fiscal year comes a new investment plan.

During the next twelve months, the pension fund’s private equity group will begin investing in Asian, Eastern European and Latin American private equity funds. This marks the first time it will explore private equity investment in regions beyond North America, the United Kingdom and Western Europe.

CalSTRS also plans to explore investments in clean energy technologies, a priority set forth by California State Treasurer Phil Angelides earlier this calendar year. It also plans to bulk up its portfolio of direct investments in private companies and secondary interests, which currently account for just 3% of the fund’s private equity portfolio.

All of these moves are part of an effort to boost the size of CalSTRS’ private equity program. The pension plan expects to put as much as 8% of its investment portfolio into the asset class over the next four years, up from the 4.7% allocation it currently maintains.

– Carolina Braunschweig

CalPERS Replaces Hayes

Leon Shahinian has been promoted to senior investment officer for the Alternative Investment Management Program at the California Public Employees’ Retirement System (CalPERS). He replaces Rick Hayes, who left last month to launch a fund-of-funds practice for Oak Hill Capital Management.

CalPERS is considered the largest institutional investor in private equity worldwide, with approximately $20 billion in committed capital. Shahinian joined CalPERS in August 1998. Before that, he co-managed a $1.5 billion fixed-income portfolio for Foundation Health Systems in Sacramento, Calif.

– Dan Primack

NY To Tap New Consultant

The New York City Comptroller’s Office, overseer of the city’s $82 billion retirement system, has started searching for a new consultant to oversee the expansion of its private equity program.

Pacific Corporate Group, which is based in La Jolla, Calif., has held the contract for the past six years. It is expected to compete with other investment consultants and advisors for the new contract.

Proposals were due July 16, and the contract will likely be awarded this month.

The pension fund plans to double the value of its private equity portfolio over the next three to five years. Worth $2.2 billion today, the retirement system’s private equity investments could total $4.1 billion once it reaches its 5% target allocation.

The pension plan began its search for a new consultant May 17, then withdrew its original RFP and issued a new one in late June.

The new consultant will advise the fund on strategy, sub-asset allocation and industry best practices, as well as identify and evaluate new investment opportunities and analyze market conditions.

– Carolina Braunschweig

PSERS Is on Track

Under the watch of new Executive Director Eric Henry, the $24.7 billion Pennsylvania State Employees’ Retirement System (PSERS) kicked off the new fiscal year in July with $150 million of new commitments to private equity funds, putting it on track to boost the portfolio’s size by 4% over the next four years.

The pension fund’s investment committee agreed in July to invest $50 million in Providence Equity Partners V, a fund being raised by Rhode Island-based Providence Equity Partners to invest growth-stage capital and complete buyouts and recapitalizations in the media and communications industries.

The pension fund manager also committed $50 million to InterWest Partners’ ninth venture capital fund. InterWest, a Menlo Park, Calif.-based venture firm, invests in early-stage technology and life science companies.

The pension fund also allocated $40 million to OCM Opportunities Fund V. Los Angeles-based Oaktree Capital Management invests primarily in buyout and distressed debt.

PSERS also said it would invest up to $10 million in UMS Partners’ first private equity fund.

In June, the pension fund announced $130 million worth of new private equity fund commitments. About $2.6 billion of Pennsylvania’s total investment pool, or nearly 11% of its total value, sits in private equity and venture capital funds. But it is increasing the size of its portfolio incrementally. By the end of the current fiscal year, the pension plan’s private equity portfolio is expected to make up nearly 12% of the fund’s total value.

– Carolina Braunschweig

Alaska Doubles PE Allocation

Alaska Gov. Frank Murkowski signed a bill in July that increases the amount of money that the Alaska Permanent Fund can invest in alternative assets like venture capital. The allocation has been doubled to 10% of total assets.

– Alastair Goldfisher