By Sarah McBride
SAN FRANCISCO Feb 5 The University of
California must make public the closely guarded performance of
some top-tier venture capital funds in which it has invested a
portion of its $10.65 billion endowment, a judge said on Monday.
No information on the funds, managed by Kleiner Perkins
Caufield & Byers and Sequoia Capital, 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, which brought a lawsuit seeking
disclosure. Reuters America is a unit of Thomson Reuters Corp
A representative for the University of California declined
to comment. Representatives from Kleiner and Sequoia, which are
not themselves parties to the case, declined to comment.
The order goes a step farther than earlier 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 "good-faith
The lawsuit, filed last year in California state court,
argued that the state Public Records Act requires disclosure of
specific investment-return information for money invested with
investment funds, including Kleiner Perkins and Sequoia Capital.
Reuters argued that the public has an interest in seeing
details on the funds' performance, and previous rulings have
held that the university's returns are public records.
The university said in response that Kleiner and Sequoia
considered the information confidential and that it receives
only aggregate returns data from those two firms - a structure
the lawsuit said was designed to avoid disclosure.
Some venture capital firms strive to keep information about
their performances secret because they fear a bad run might hurt
their reputations, other venture capitalists say.
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 are
not exempt from disclosure, including the dollar amount of the
commitment made, the net internal rate of return and the dollar
amount of cash distributions received.
The Reuters lawsuit, filed a year ago, stems from a request
for individual fund details of the university's investments in
Kleiner and Sequoia Capital funds by Mark Boslet, senior editor
at Thomson Reuters' Venture Capital Journal and at PeHub, an
online publication about private equity, buyouts and venture
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 fund 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.