Firms & Funds

California PE transparency bill heads to Gov. Jerry Brown’s desk

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private equity, pension funds, California, transparency, Jerry Brown
California Gov. Jerry Brown leaves the stage at the Democratic National Convention in Philadelphia, Pennsylvania, U.S. July 27, 2016. REUTERS/Scott Audette - RTSJZIG
  • Chiang: Beneficiaries can see “behind the curtain” of PE
  • AB 2833 clears legislature with unanimous votes
  • Bill goes to Gov. Brown, who has 30 days to decide

California’s private equity transparency bill is on its way to Gov. Jerry Brown’s desk, its final hurdle to becoming law.

AB 2833, sponsored by Assemblyman Ken Cooley and State Treasurer John Chiang, passed the state’s assembly by a vote of 69-0 Wednesday. The bill cleared the state senate on Aug. 16.

Brown has not signaled whether he will sign the bill into law, though it received unanimous support in both houses of the legislature. Deputy Press Secretary Gareth Lacy declined to comment. Brown has 30 days to decide.

AB 2833 requires PE general partners to provide their California pension investors with reports detailing fees and expenses paid by funds, investors and portfolio companies, as well as gross and net returns.

“For the first time, taxpayers and pension beneficiaries will get to go behind the curtain to view the previously hidden fees and charges paid to private equity investment companies,” Chiang said in a statement.

“This is important because every dollar paid in fees is one less dollar available for promised pension benefits.”

In its original form, firms would have had to disclose the total fees a firm and its affiliates charged each fund’s underlying portfolio companies. This would have enabled the pensions to get a deeper sense of the financial burden placed on each underlying asset of the fund.

California Public Employees’ Retirement System officials successfully fought to reduce the required disclosure to each pension’s pro-rata share of those fees.

“In a perfect world, we would know the full fee burden. The long-term value of a portfolio company is impacted by the fees. But we view the legislation we’re running this year as an important first step,” Deputy Treasurer Grant Boyken, who worked on the bill, told Buyouts earlier this year.

Cooley’s office could not be reached for comment.

Action Item: To read AB 2833, visit www.leginfo.legislature.ca.gov

California Gov. Jerry Brown leaves the stage at the Democratic National Convention in Philadelphia on July 27, 2016. Photo courtesy Reuters/Scott Audette