California’s SB 1319: What Alternative Fund Managers Should Know

Fund managers with California public pension investors should be tracking Senate Bill 1319, which is making its way through legislative committees. If enacted, it would increase the burden on California public pensions to disclose greater proprietary and confidential information than is required under current law.

SB 1319 would require California’s public investment funds – including CalPERS, CalSTRS and the state’s roughly 80 other public pension systems – to publicly disclose detailed data for alternative investments, including:

• Performance benchmarking for each alternative investment measured against a comparable public market index.
• Certain portfolio company-level information, including asset locations and workforce data.

The bill covers alternative investments broadly, including private equity, venture capital, hedge funds, private debt and real assets.

The disclosure obligations would run to the public pension funds as investors, not directly to fund managers. That said, the bill would effectively require California public pension investors to publicly disclose information that most fund governing documents currently restrict, including fund-level performance data and portfolio company information, creating direct tension with standard confidentiality provisions (which generally limit public disclosures for public pensions to fund-level data, not portfolio company data).

The bill’s ultimate form is not settled. To date, it has cleared two Senate policy committees without opposition votes, passing the Judiciary Committee on April 14 and the Labor, Public Employment and Retirement Committee on April 22. The bill, authored by Sen. Dave Cortese and joint-authored by Sen. Maria Elena Durazo, now heads to the Senate Appropriations Committee. The Appropriations suspense file hearing in late May will be the next significant procedural test. Further amendments are possible, and the portfolio company disclosure provisions, in particular, are likely targets for negotiation. Currently, SB 1319 is opposed by the California State Association of Counties, Rural County Representatives of California, State Association of County Retirement Systems and Urban Counties of California. Fund industry trade groups have not yet made public statements in respect of the bill.