SenatorBissMarch2017Private equity firms would have to disclose the investment fees they charge to public pension funds in Illinois under legislation sponsored by Senator Daniel Biss (D-Evanston).

These sometimes lucrative fees charged by private equity firms and hedge fund managers are exempt from disclosure to taxpayers under current state transparency laws. Even the boards that oversee the pension funds are kept in the dark about the fees. That’s ludicrous, Biss said.

“Taxpayers have the right to know what government pays for salaries, pensions, cars, office supplies, phone bills – every penny that goes out the door, down to the most miniscule expense,” he said. “But we make an exception for lucrative pension investment fees paid to private equity firms. It’s indefensible.”

Senate Bill 779 would require pension systems to disclose agreements with private equity funds and certain provisions of those agreements. It also would require private equity fund managers and general partners to disclose certain investment fees paid to the funds.

Disclosures would be published on the pension systems’ websites and would be subject to the state’s freedom of information act. The legislation applies to every retirement system or pension fund regulated by the Illinois Pension Code, as well as the Illinois State Board of Investment.

The Teachers Retirement System, the largest pension system in Illinois, currently has nearly $8.5 billion invested and committed to the private equity asset class. Some funds, such as Downstate Police and Fire Funds, are precluded by law from making such investments.

Senate Bill 779 passed out of the Senate’s Licensed Activities and Pensions Committee Wednesday on a 7-5 partisan roll call.

According to a 2015 ranking by Institutional Investor’s Alpha magazine, the country’s 25 top-earning hedge fund managers raked in an estimated $11.6 billion in 2014. The previous year, the top 25 collectively earned nearly double that, estimated to be more than $21 billion.

Comparatively, the aggregate pay for all of the kindergarten teachers in the nation in 2014 was an estimated $8.5 billion.

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