The University of California (UC) finally gave in to media and legal pressure in mid-October, releasing detailed information about the performance of its private equity investments. But it was still battling to maintain the privacy of comments made by its investment staff in closed-door meetings.
See pages 8 and 10 for comprehensive charts.
Analysis of UC’s data by Thomson Venture Economics, publisher of VCJ, shows that UC’s best investment was in Kleiner Perkins Caufield & Byers VIII, a 1996 fund with a 286.6% IRR as of March 31. That placed KPCB VIII in the the top quartile of performance of similar funds from the same vintage year, according to Thomson VE.
UC lost its final legal effort to keep its PE performance data under wraps on Sept. 30, but it continued to put up a fight over the amount of data it was required to make public. The university system learned at the end of September that the California Supreme Court had rejected its appeal of a July 24 ruling by Alameda County Superior Court Judge James Richman. Richman had ruled that UC must disclose IRRs for each of its 94 private equity fund investments.
On Oct. 1, UC released IRRs that were more than 15 months old. Additionally, it refused to release anything more than the IRRs, even the vintage years of its funds. Steven Mayer, an attorney who represents UC, said at that time that UC was complying with Richman’s order and that the original public records act request was made in late 2002 and asked only for IRRs.
After receiving requests for current returns from VCJ and the San Jose Mercury News, UC on Oct. 3 released IRRs that were current as of March 31. Still, it released only the names of the funds and their IRRs, nothing more.
Karl Olson, an attorney who represented two of the three parties in the disclosure suit against UC, was livid that UC continued to hold back information. “It’s stunning, the level of arrogance and contempt they have for the court process,” Olson said upon hearing about UC’s limited release of data. “They are not going to behave like CalPERS or any other public pension fund. They’re saying to the public, Screw you.'”
Olson filed another public information act request on Oct. 3 on behalf of his two clients (the Coalition of University Employees and retired UC professor Charles Schwartz) as well as the the Mercury News, the third plaintiff in the original suit. The new request asked for cash in/cash out data and for UC to post its PE performance data on its Web site.
Olson was not surprised, then, that the university finally complied on Oct. 16. “They did it after they got their ass kicked by the [California] Supreme Court and after we did a follow-on public records act request,” he says.
Olson was still waiting for UC to comply with another part of Richman’s ruling, which ordered UC to make available the minutes and tape recordings of meetings held by UC investment staff in January and March 2000 and in October and November 2002. UC was scheduled to appear in Richman’s court on Oct. 23 to discuss the minutes and tapes, Olson says. He theorized that UC wants to keep the tapes under wraps because they probably reveal candid discussions.
UC’s legal journey began when it was sued by the Mercury News, the Coalition of University Employees and Schwartz on April 1. The plaintiffs filed suit after UC refused to honor a request under the California Open Records Act. Their suit argued that the open records act compels a public institution like UC to release IRRs. Moreover, the suit suggested that similar disclosures by other public pension systems had not led to any fiscally negative consequences.
A July 24 ruling by Richman agreed with the plaintiffs and cited the fact that disclosure-friendly University of Michigan had been granted access into a new fund offered by respected Silicon Valley venture firm Sequoia Capital. That same day, Sequoia Capital told the University of Michigan that it was kicking it out of the new vehicle. It also asked Michigan to sell any other active Sequoia partnership stakes on the secondary market.
Such repercussions did not faze Richman, however, who dismissed a motion for reconsideration. On Sept. 5, UC filed an appeal and disclosed that it, too, had been booted from the new Sequoia fund and had been asked to sell its Sequoia stakes. The school argued that complying with Richman’s ruling would damage its bottom line, and it used the loss of prospective Sequoia-related returns as proof.
UC noted that it has received $508 million from Sequoia on an investment of about $110 million, a return of 460 percent. Overall, UC’s private equity investments of $650 million have resulted in a return of $2.2 billon to date, according to court filings.
The California Court of Appeals sided with Richman. UC appealed to the California Supreme Court, but the court declined to hear its plea.
Dan Primack contributed to this story.