As pension funds nationwide have increasingly poured money into venture-capital funds, some states have opted to hide from public view details of those investments.
A 2004 Colorado state law allows public pension funds to keep confidential investment details “if the disclosure of such information would jeopardize the value of the investment.”
Other states with such laws include California, Texas and Massachusetts.
Proponents of the nondisclosure laws say it stops competitors of venture-backed companies from learning details of each company in a venture fund’s portfolio.
“If I’m an investor, I don’t want the world to know what I’m investing in,” said Norma Anderson, a former Republican state senator who sponsored the Colorado nondisclosure bill in 2004.
But the laws also make pension investments in venture funds more difficult for taxpayers – or public watchdogs – to evaluate.
Nondisclosure laws contradict the idea that taxpayers are entitled to see how the money is spent, said Karl Olson, a San Francisco-based attorney previously involved with three lawsuits seeking to increase the transparency of pension investments.
“Concern about the need for confidentiality is overblown,” he said. “Taxpayers need to know that the public money is being spent – or in this case, being invested – wisely.”
The issue was brought to the forefront this week when media reports revealed that the Colorado Public Employees’ Retirement Association, or PERA, would not follow through on a previous commitment to invest $15 million with a California venture-capital firm.
PERA controls about $35 billion on behalf of 380,000 public-sector workers, former workers and retirees. It has invested with venture-capital funds since 1982, with so-called alternative investments delivering an average annual return of 10.7 percent.
PERA is among a group of pension funds, including the New Mexico State Investment Council, that invested in funds run by Los Angeles-based International Technology University Ventures.
PERA’s decision to withhold some of the $15 million came after three of five staff members left ITU for various reasons – and PERA and the New Mexico pension fund raised questions about campaign contributions from startup companies in which ITU invested.
PERA has declined to disclose details of its actions, citing the nondisclosure law.
“These type of (public) entities have an obligation to be forthright,” said Rich Todd of Denver-based Innovest Portfolio Solutions, which advises pension funds on investment decisions. “But a lot of public funds feel they need a (nondisclosure) law to get in on the better deals.”
Such nondisclosure laws are often pushed for by influential venture capitalists, some of whom may not take money from pension funds if those laws are not in place.
“There’s so much money floating out there that (venture firms) can say no if there’s too much transparency,” Todd said.
Staff writer Will Shanley can be reached at 303-954-1260 or wshanley@denverpost.com.
