Fee & LPA Transparency Bill Introduced

Fee & LPA Transparency Bill Introduced

May 11, 2016

On May 3rd, 2016, sponsors Rep. Laura Fine (D-17th) and Sen. Daniel Biss (D-9th) introduced HB6292 which requires Illinois public pension funds to report within 90 days of a new investment in an alternative asset class (including VC & PE):

All of the provisions of the Limited Partner Agreement including:
  • all management fee waiver provisions
  • all indemnification provisions
  • all clawback provisions
  • the cover page & signature block
Report annually on:
  • fees & expenses that the system paid
  • system’s share of all fees and expenses
  • amount of all management fee waivers made
  • total amount of portfolio holding fees incurred by each portfolio holding as payment to the investment fund

IVCA recognizes that more transparency is coming to our industry but fervently hopes that the issue is resolved at a global level with one agreed-upon reporting format as opposed to state-by-state, which will create an unnecessary administrative burden for the General Partners.

In the near term, this bill will disadvantage Illinois Pension Funds
  • relative to other states whose pension funds do not have this reporting requirement, and
  • relative to other alternative investors not subject to this disclosure
In addition, we are concerned that expense recording will not be matched to the benefits/returns of the fund so we would prefer to see fees matched against benefits received with a look back after fund life as opposed to annual reporting.
Fee transparency is a “hot topic” for the LP community and the SEC.  Waiting until it is globally mandated seems a prudent course and will reduce the administrative requirements for a GP that might need to produce multiple reports for multiple states.

If any of our members have comments or input on this proposed legislation, please contact Maura O’Hara (mailto:[email protected] or 312/241-1615).  The bill is expected to be heard in Executive Committee today, May 11, 2016.  We will continue to study the bill closely and will report on any movement.