Investment records closed in Oct.

By: R.G. RATCLIFFE
Houston Chronicle Austin Bureau
September 18, 2002, Wednesday

AUSTIN - Charles Miller, chairman of the University of Texas board of regents, said he expects higher education trust fund managers today will establish a policy of publicly releasing all financial information on the $1.7 billion portfolio of high-risk private equities investments.

"What I'd like is for Texas to be the trendsetter - this is the obligation of a public fund," Miller said. "The argument that information needs to be held back, I just don't buy it for those private equity funds."

Permanent University Fund managers had promised to make public the performance of private equity managers in 1999 after a Houston Chronicle report that almost a third of the $1.7 billion investments made between 1995 and 1998 had gone to managers with personal or political connections.

But the University of Texas Investment Management Co. decided to close the records of individual managers again last October as the nation's financial markets declined. UTIMCO released performance records on the overall private equities portfolio that showed it has lost 15.96 percent of its value in the year ended July 31. Private equity funds invest directly in business ventures.

Miller said the decision to close the records was not a change in University of Texas policy. He said he believed it arose out of confusion that occurred when an interim staff was in charge before current UTIMCO President Bob Boldt came on board in April.

Boldt had told the Chronicle that the UTIMCO board of directors voted to close the records last October based on a recommendation from Cambridge Associates, an investment adviser for the fund. Boldt had asked Attorney General John Cornyn to rule that the records are exempt from disclosure under a provision of the open records law that allows government agencies to withhold information if it would create a competitive disadvantage for the agency.

Republican Gov. Rick Perry and his Democratic opponent, UT Regent Tony Sanchez, Monday said the records should be public. Cornyn said he did not know the issues in UTIMCO's request, but he said the burden was on the agency to prove the records should be withheld.

Democratic attorney general candidate Kirk Watson said Tuesday such records should be public. His Republican opponent, Greg Abbott, could not be reached for comment, but his aide, Jason Johnson, said Abbott favors as much public disclosure of government records as possible.

Miller said professional fund managers like Boldt want to withhold the performance information on private equity funds because the national investment bankers who manage them want to operate somewhat in secrecy.

He said the California Public Employees Retirement System posted private equity managers' performance on the Internet about a year ago, but pulled the information down after complaints from the investment bankers. Calpers is the nation's largest public trust fund.

But Miller said it is time investment bankers learn that if they want investments of public money from public trust and retirement funds they need to be accountable to the public.

"The public's entitled to know. People to analyze it. It's good information to have public," Miller said. "Ultimately, managers are going to understand they can't have their freedom. Those are long-term contracts."

Miller said some information may not be immediately available because of confidentiality agreements in some of the contracts with private equity fund managers. He said those confidentiality agreements will have to be broken and no future contract will contain one.

"I don't think we'll do another contract in the future that has a confidentiality agreement," Miller said. "If they have it, we'll ask them to give us permission. If they don't give us permission, we might decide to do some things to create the information. We have a right to do it."

Miller said the information already is all but public among the nation's financial managers. He said private equity managers don't like to release their interim returns because they cannot be readily compared to the rates of returns for stocks and bonds.

Private equity returns often show a loss in the first several years. For instance, venture capital investments in a startup company may not show a profit until the company first sells stock on the public market.

Miller said he expects UTIMCO to make public the rates of returns for its managers as well as the remaining value of the investments. If UTIMCO does not act, Miller said he has set PUF disclosure as an item on the agenda of an emergency regents meeting Saturday that has been called to interview candidates for president of the University of Texas-Tyler medical school.

"Absolute maximum disclosure is our policy. And we're going to follow that," Miller said. "It's correct behavior."