Friday, September 5, 2003
contact: Trey Davis, (510) 987-0056


The University of California today (Sep. 5) filed a petition for writ of mandate in the California Court of Appeal in San Francisco to overturn an Alameda County superior court ruling that would require UC to disclose the confidential internal rates of return (“IRRs”) for the private equity partnerships in which the University invests.

The University contends that the IRRs are trade secrets and therefore exempt from disclosure under the California Public Records Act and also that disclosure of such confidential information will result in the University being excluded from future investment in these funds. Private equity funds have achieved the best return of all the University’s investments and have produced billions of dollars for the University’s pension beneficiaries and its endowment funds. In contrast to the serious damage that will result from forced disclosure of this confidential information, there will be little benefit because the University already provides the public with extensive information about its private equity investments.

"Contrary to the claims of the plaintiffs, the University of California freely discloses a great deal of information on the investment performance of its retirement and endowment assets on a quarterly basis,” said David H. Russ, UC Treasurer. “These performance reports include overall total portfolio performance and sub-asset class performance, including aggregate performance for the private equity portfolio.”

The University also discloses on a quarterly basis how much is invested in each private equity partnership, the number of shares held, and the market value of each such investment.

“In March 2003 – prior to the filing of the current lawsuit by the San Jose Mercury News – the University began producing a publicly available supplemental report on the performance of its private equity that goes into even greater detail for its venture capital, buy-out fund and international private equity investments,” Russ said.

The University decided to appeal Judge Richman’s ruling because it believes that disclosure of the confidential IRRs will seriously impair its opportunities to invest in top-tier venture capital partnerships. Such funds have historically produced hundreds of millions of dollars in returns to the University and its employee pension funds. Since UC began investing in this asset class, it has invested $649.5 million as paid-in capital to venture capital partnerships. In return, UC has received distributions of greater than $2.2 billion, or a net increase in excess of $1.5 billion. Another way of looking at this performance is that for every $1 invested $3.50 was returned.

UC has already suffered adverse consequences from the lower court ruling. In an August 27, 2003 letter, Sequoia Capital terminated UC from its newest partnership and asked UC to sell its holdings in 10 other Sequoia funds. As previously disclosed, UC investments in partnerships managed by Sequoia Capital (Funds III to X) have returned over $508 million on an investment of about $110 million for a 4.6-fold return. Sequoia noted that it was taking this action in response to the lower court’s decision.

“We are attempting to protect our access to the top-tier funds by not breaching our individual confidentiality agreements with them," Russ said.

As of June 30, 2003, UC’s assets under management totaled $53.25 billion, with $646 million in private equity. This includes private equity assets of $531 million in pension funds and $115 million in endowment funds.

Private equity helps diversify the portfolio, and offer an important opportunity for maximizing the funds' overall performance. UC’s private equity investments are the best performing sector of its portfolio. UC’s private equity investments gained more than 32% a year in the five-year period ended June 2002. For the year ending June 30, 2002, UC’s private equity performance has been stellar, 35.9% over the past 10 years, and 32.5% over the past five years. For comparison, UC’s policy benchmark is 16.7% for the 10-year period and 8.4% for the five-year period.

For more information about UC’s current private equity performance and disclosure:


For more information about UC portfolio returns:

The UC Retirement Plan provides benefits to more than 35,000 retirees. No employee contribution has been required since 1990; and the University’s ability to provide retirement benefits remains unaffected by the current economic climate.

A copy of the appeal is available online at http://www.ucop.edu/news/irrappeal.pdf

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