Pension Officials Ask SEC To Improve Private Equity Transparency

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Local pension officials are apparently fed up with private equity fund fees. A coalition of state and city treasurers and comptrollers announced earlier this week that they had sent a letter on Tuesday to Securities and Exchange Commission Chair Mary Jo White requesting the adoption of new rules that mandate more  transparency from private equity funds in disclosing fees and expenses to limited partners.

The bipartisan coalition includes 13 public pension funds which manage more than $1 trillion in assets. The group requested that the SEC develop rules that mandate clear and consistent disclosure of fees and expenses by PE funds, as the current “fee disclosures” are very complex and often intentionally opaque.

The pension officials also noted that having private equity firms disclose information relating to fees and expenses quarterly instead of annually would put them on the same footing as other investment managers, and also called for a single standard for reporting across the PE sector.

More on local pension fund officials letter to the SEC about private equity funds

The letter to the SEC highlights that only one (directly billed management fees) of the four separate types of private equity fees are typically given to investors. Fund expenses, allocated incentive fees and portfolio-company charges are almost always buried deep inside an annual financial statements, and are only provided once a year.

The main goal of the group is to make sure that private equity firms provide consistent and comparable fee disclosures. They note that every stakeholder must play a constructive role in helping public pension funds meet their fiduciary obligations, but the SEC is the agency that must take common-sense steps to make sure there is a standard process for how fees are determined and disclosed.

Statements from selected signatories to the letter

The local officials who signed the letter included District of Columbia Treasurer Jeffrey Barnette; California State Treasurer John Chiang; North Carolina State Treasurer Janet Cowell; New York State Comptroller Thomas P. DiNapoli; Virginia State Treasurer Manju Ganeriwala; Wyoming State Treasurer Mark Gordon; South Carolina State Treasurer Curtis Loftis, Jr.; Rhode Island General Treasurer Seth Magaziner; Vermont State Treasurer Beth Pearce; Nebraska State Treasurer Don Stenberg; New York City Comptroller Scott M. Stringer; Oregon State Treasurer Ted Wheeler; and Missouri State Treasurer Clint Zweifel.

Treasurer Chiang of California noted: “We are fiduciaries, entrusted with the care of the pension savings of hundreds of thousands of public workers. It’s both our obligation and our sworn duty to ensure maximum transparency in the management of these funds. Transparency matters because it promotes accountability and protects us from abusive and wasteful spending.”

Treasurer Cowell of North Carolina commented: “I’m proud that North Carolina is already collecting and reporting private equity performance and fees voluntarily. The time has come to require standardized and comprehensive reporting from private equity firms to level the playing field.”

The full letter in PDF form can be found here  PR15-07-081

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