In Pensions & Investments, Ropes & Gray Private Investment Funds Attorneys Provide Guidance for Private Fund Managers on California’s New Fee Disclosure Law
California’s recently enacted fee disclosure law became effective on Jan. 1. The disclosure law will affect all California-based public pension plans that invest in private funds and all private funds that have (or seek) public plan investors in the state. The law is intended to provide transparency with respect to the fees and expenses paid by California public pension or retirement systems to private equity funds, venture funds, hedge funds and absolute-return funds in which they invest.
In a Pension & Investments article titled “Squaring the letter of California's new fee disclosure law with the realities of alternative investment funds” private investment funds partner Raj Marphatia (Silicon Valley) and counsel Catherine Skulan (San Francisco) provide an overview of the law and guidance on specific disclosures the law requires. “It is becoming clear that implementation of the new law will raise a number of interpretive issues, given its sweeping wording and one-size-fits-all approach,” Mr. Marphatia and Ms. Skulan state in the article. Mr. Marphatia and Ms. Skulan also address which alternative investment funds are covered, the concept of a “related party” as defined in the law, the definition of portfolio companies, and “reasonable efforts” public pension plans are required to make to obtain information required by the disclosure law for contracts entered into before Jan. 1. “Compliance with the law will require flexibility and pragmatism from both sides,” Mr. Marphatia and Ms. Skulan note, and funds should begin considering what disclosures they would be able to provide to California public pensions, both with respect to existing contracts and new contracts entered into after December 31, 2016.