42 fund managers didn't sign waiver

By R.G. RATCLIFFE
Houston Chronicle Austin Bureau
March 14, 2003, Friday

AUSTIN - Managers of the state's higher education trust fund once again are not fully disclosing the performance of their high-risk private equity investments, but they say the blackout is meant to ensure future openness.

University of Texas Investment Management Co. is withholding the profit and loss information for 42 fund managers who handle $855 million in Permanent University Fund investments.

Overall performance of all the PUF's investments has been hit so hard by the national recession that the trust fund will produce $15 million less this year than it did a year ago. Income from the PUF is used to pay for capital construction projects at campuses of the Texas A&M and University of Texas systems.

UTIMCO President Bob Boldt on Monday formally asked Attorney General Greg Abbott to rule whether investment returns for the multimillion-dollar private investment fund managers have to be made public. Boldt said he hopes Abbott will resolve the issue once and for all.

Former Attorney General John Cornyn, now a U.S. senator, ruled in favor of public disclosure last fall after the Chronicle reported on the secrecy surrounding the fund. After that ruling, UTIMCO released performance data on all of its managers.

The Houston Chronicle had sought the records while following up a 1999 report by the newspaper that found possible cronyism in how investment managers were chosen by UTIMCO's board of directors. The board is made up of University of Texas and Texas A&M University regents and private investment advisers.

Boldt said Cornyn's ruling only applied to the records available at the time. He said he wants a ruling from Abbott to give UTIMCO permanent legal cover from potential lawsuits that might be filed by the fund managers.

At the time that UTIMCO made its original commitments to the fund managers, it signed confidentiality agreements. Boldt said those agreements can only be overlooked if UTIMCO is ordered to release the records by the attorney general or a state court.

About half the fund managers signed waivers allowing the release of the information. But another 42 managers did not sign waivers, and their records are being withheld until a ruling from Abbott.

"Technically we're still covered by the confidentiality clauses in those agreements, which opens us to potential lawsuits or being declared a defaulting partner, which in some cases could cause us to lose our equity," Boldt said.

Abbott spokeswoman Angela Hale said the attorney general wants to rule on the case no later than May 13. She said state law will cause a delay because he has to give the partnerships time to file exceptions if they want to do so.

"He wants it done," Hale said.

Boldt said after Cornyn's ruling in the Houston Chronicle case, his office received 800 requests for the fund manager performance data.

After the Chronicle won its fight for public disclosure with UTIMCO, the San Jose Mercury News won a lawsuit to force the California Public Employees Retirement System to release similar records. But Calpers did not release the data on all of its investment managers.