We Keep Asking, CalPERS Keeps Saying No

Early last month I requested that CalPERS release the most recent carrying values of its ownership positions in Apollo Global Management, The Carlyle Group and Silver Lake Partners. Not in the funds, but in the management companies. These were huge investments, and one of them is smeared with Al Villalobos’ fingerprints. The public should know how they’re doing.

CalPERS initially replied by saying that the information is released each year in CalPERS annual investment report (under the “expansion capital” section, for some reason). But here’s the problem: That information is absurdly out of date. Not just today, but as of the time of release.

The pension system puts out its annual investment report in late January or early February of each year, but only reports carrying values for Carlyle, et. all though June 30 of the previous year. This is reporting lag on steroids (or perhaps on dope), and means that the data is largely irrelevant by the time it’s released. Moreover, it means that the latest information currently available is more than 18 months old!

We’ve gone back and forth with CalPERS’ lawyers – who basically are doing the bidding of an embarrassed investment staff – and were most recently given two more detailed reasons for the lack of transparency:

(1) Trade secret. This is, of course, absurd on its face. How can the information be trade secret if CalPERS eventually plans to release it anyway? Moreover, CalPERS agreed years ago that the value of fund investments, for example, did not constitute trade secret, so long as the underlying portfolio company values were not disclosed. CalPERS should look at the actual hierarchy, in which Carlyle The Firm sits atop its funds, not the other way around.

(2) Secondary sales: CalPERS argues that regular disclosure would “significantly impact our ability to buy, sell, or consider strategic alternatives regarding our positions.” Two problems with this. First, sources tell me that CalPERS is not trying to buy or sell any of the relevant securities. Second, and more important, CalPERS regularly releases the carrying values of fund investments that it actually has sold on the secondary market. How come such disclosure didn’t hamper those sales? Could it be because this argument is bunk?

(3) ROI damage: CalPERS argues that a more regular release of this data could damage its returns, and thus violate its fiduciary duty to pensioners. Once again, however, it gives no explanation for why disclosure would damage returns. Apparently their say-so is supposed to be good enough.

My goal is to once again appeal, but the reality is that CalPERS is trying to run out the clock until the next late January release. I’ll keep you updated…