CalPERS Posts Fund’s Record on Web Site; Money Managers Aghast
CalPERS Posts Fund’s Record on Web
Site; Money Managers Aghast
It’s a report card that has rocked the secretive venture capital world,
and one that even the ‘A’ students didn’t care to see displayed on the
refrigerator. CalPERS, the giant California pension fund that sets trends
for many large investors, has posted on its Web site the performance of
every venture or buyout fund in which it’s invested for the past decade.
Firms typically guard these numbers carefully, but the CalPERS chart even
says which funds are meeting expectations, and which are disappointments.
The results were first posted in May, but it took until July for word to
spread. Even now, managers of venture funds and other private portfolios are
talking about the posting, aghast that the numbers — good, bad, and ugly
— are there for all to see. Said one private equity executive, "If
you show up in the ‘below expectations’ column, you’re done."
Boston’s Thomas H. Lee Co. gets a gold star: The buyout firm’s 1996 fund
was one of CalPERS’s best performers that year, with a 44.3 percent
average annual return, and sits neatly in the "exceeds
expectations" column. But woe to the Beacon Group, Inroads Capital
Partners, and Atlantic Medical Capital, among the firms slapped with the
rating "below expectations/with concern."
Getting poor marks from CalPERS, the California Public Employees Retirement
System, is a sure warning that the $158 billion pension fund may not sign up
for that firm’s next fund. But it also could antagonize venture funds that
CalPERS wants to invest in. Peter Lawrence, managing partner at Flag
Ventures in Stamford, Conn., a firm that invests in private equity funds on
behalf of wealthy families, said, "Will CalPERS find itself having more
difficulty getting into funds, now that they’ve gone to the trouble of
publishing these numbers? I think the answer is yes."
For many years, CalPERS has done this detailed performance assessment for
board members of its $14 billion portfolio of alternative investments. The
information could have been accessed by others under the state’s public
disclosure laws. But this is the first time CalPERS has posted the report on
its Web site, albeit in the archives, in a place not easily found. Brad
Pacheco, spokesman for CalPERS, said, "This information has always been
available."
The industry buzz around the report stems from the secrecy with which
venture firms and buyout artists guard the specifics of their returns.
Virtually every firm claims "top quartile" performance, and the
numbers they give out are suspect, venture analysts say. Steve Lisson of
Austin, Texas, on his controversial Web site, InsiderVC.com,
tracks venture returns by doing his own calculations on venture portfolios.
He is the only independent source on such numbers and has drawn fire from
some venture capitalists for breaking the code of silence.
