CFAC says employees have the right to know what funds they invest in
The California First Amendment Coalition (CFAC) is calling for more disclosure from the California Public Employees Retirement System (Calpers) in its dealings with hedge funds.
Peter Scheer, executive director of CFAC, is demanding basic details disclosed by Calpers and the University of California (UoC). These include the names of hedge funds it has invested in, amounts invested and lengths of time the positions have been held, performance, permitted and actual use of leverage and fees charged by the funds.
According to Bloomberg, Calpers has approximately $1bn in hedge funds, and plans to raise this figure to $2bn, while UoC has about 6% of its $5.1bn endowment pool allocated to them. Scheer said Californian public employees have a right to know whether they are exposed to convertible bonds and certain kinds of highly leveraged derivatives, though their pension fund's investments.
"I don't think pension funds really do knowingly invest in the kinds of hedge funds that do a lot of that, but in the event that some of them do, the public should be aware of it," Scheer added.
California is already considering legislation on public pensions' alternative investment disclosures, to require a certain level of disclosure but also to draw a line under it, to prevent demands for further statements that the funds they invest in might find intrusive, he said.
This will give comfort to funds that have obtained a confidentiality agreement with Calpers or UoC but know they are vulnerable to being sued and ordered by a court to reveal details of certain investments, he said. "It makes nobody happy but makes it possible for those institutions to continue to invest in the best venture capital firms and hedge funds."
CFAC has given the two institutions 30 days to provide at least some of the requested details. He did not rule out the possibility of taking the matter to court. "It is not our hope to, and if we get the information we certainly would not," he said. "By asking for disclosure about certain risk characteristics, we are not necessarily trying to forbid them, or even discourage them, from making some risky hedge funds investments."
The demands contained "nothing particularly intrusive or sensitive," Scheer maintained. "We did not ask any kind of statistics or detailed information about particular transactions, because in my view that may put the pension funds in a position that they lose the opportunity to invest in the best fund managers.
"Any hedge fund that would object to the kinds of questions that we have asked is not being reasonable," he added. He shrugged off fears funds may bar investment from Calpers or UoC. "They cannot do that. This is America and these are public funds. If that is the way they are going to be it is too bad. They can get their investment capital elsewhere." Scheer said.
He said the requested disclosures would benefit the public despite the fact most Californian tax-payers would neither understand them or even bother to look at them, as experts would draw attention to anything excessively risky or untoward.
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