| SAN FRANCISCO
SAN FRANCISCO Feb 4 The closely guarded
performance of some top-tier venture capital funds in which the
University of California invested a portion of its $10.65
billion endowment must become public, a judge said on Monday.
No information will come out immediately. The court is
giving the university a stay until March 11 to allow the regents
a chance to appeal.
"I regard this as a victory," said Karl Olson, outside
counsel for Reuters America, a unit of Thomson Reuters Corp
, which brought the suit.
A representative for the University of California declined
to comment. Representatives from the funds, which are not
themselves parties to the case, did not immediately respond to
requests to comment.
The order goes a step farther than earlier tentative rulings
because it calls for the university to make an "objectively
reasonable effort," based on "what the legislature would
consider to be a reasonable effort," to obtain performance
information on the funds. Previously, the judge had called for a
The original lawsuit, filed last year in California state
court, argues that the state Public Records Act requires
disclosure of specific investment-return information for funds
invested with venture capital firms Kleiner Perkins Caufield &
Byers and Sequoia Capital.
Reuters argued that the public had an interest in seeing
details on the funds' performance, and previous rulings have
held that the university's returns are public records. The
university argued that Kleiner and Sequoia considered the
information confidential and that it receives only aggregate
returns data from those two firms.
Some venture capital firms strive to keep information about
their performances secret because they fear a bad year might
hurt their reputations, other venture capitalists say.
The university has said the investment-performance
information for the individual funds is not in the public record
because it does not have the data. It says it only receives
aggregate data on its holdings in multiple funds run by the two
firms - a structure the lawsuit alleges is designed to avoid
The university failed to show that the performance data for
individual funds "does not relate to the conduct of the people's
business or that it does not have constructive possession of
that information," wrote Judge Evelio Grillo in his order.
Constructive possession means the right to control the records.
"Assuming that the regents can obtain the fund level
information, it is not exempt from disclosure," he wrote.
Sequoia has already made some returns data public.
The lawsuit illustrates the conflict between the desire of
public investment funds to invest with top-tier venture firms
and the desire of some of those firms to keep their performance
California's public-records law, which was amended after a
2003 lawsuit forced the University of California to disclose
investment returns, shields some types of investment data from
disclosure, such as details about the performance of the
underlying companies that make up venture funds.
It explicitly states that other pieces of information,
including the dollar amount of the commitment made, the net
internal rate of return and the dollar amount of cash
distributions received, are not exempt from disclosure.
The Reuters lawsuit, filed a year ago, stems from a request
for individual fund details on the university's investments in
Kleiner and Sequoia Capital funds by Mark Boslet, senior editor
at Thomson Reuters' Venture Capital Journal and PeHub, an online
publication about private equity, buyouts and venture capital.
On its website, the university provides updated
individual-fund level returns for all venture funds that date
from before 2007 in its portfolio except a handful of funds.
They are an Accel Partners fund the university has since
provided information on, the Kleiner funds and the Sequoia
More recent funds' returns are not considered meaningful, as
venture capital can take several years to start showing returns.
Public-records laws caused tension over suddenly public
information for venture-capital firms about a decade ago when
many public groups started disclosing returns. Since then, many
states have clarified their laws to detail exactly what must be
disclosed, and most venture-capital firms have grown used to the
possibility that their returns could become public. However,
several top venture capital funds generally do not take
investments from public groups they believe could disclose their
returns, lawyers, consultants, investors and advisers say.
While even those top firms are not in a position to turn
down all direct investments of public money, they can limit it
to states and institutions with public-records laws and policies
that don't require disclosure of returns.
The case in Superior Court in the State of California,
County of Alameda, is Reuters v The Regents of the University of
California, case no. RG12613664