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In a closely watched case for pension funds and venture capitalists, the University of California yesterday lost its battle to prevent the disclosure of performance returns of its private-equity investments.
The California Supreme Court let stand a lower-court ruling that required the data be released. The ruling is a setback for public pension funds and venture capitalists that have resisted increasing demands to release the data under public-records requests; they have argued that doing so would put them at a competitive disadvantage.
"We are extremely disappointed that the courts have not chosen to examine closely the merits of our case and been persuaded," said university spokesman Trey Davis.
"As we've indicated throughout this case, the university is deeply concerned that disclosure of this information would lead existing partners to request our withdrawal from top-tier funds and that the university would not be invited into future opportunities," he added.
In August, venture firm Sequoia Capital, of Menlo Park, Calif., told both the University of California and the University of Michigan that it was removing the schools from its latest $395 million fund because of the disclosure issue and requested that they divest themselves of their holdings from previous Sequoia funds.
Steven L. Mayer, an attorney representing the University of California Regents, said the university "will disclose the [internal rate of return] data that the plaintiffs requested in the next day or so." A lower-court deadline for the release of the data expired yesterday.
The state Supreme Court decision to not hear the case follows a ruling last week by the state court of appeals, which let stand a superior court ruling in August requiring the data be released.
The lawsuit, filed last April, pitted the university against plaintiffs led by a coalition of university employees who were joined by the San Jose Mercury News.
"After the long battle, this means they have to disclose what every other public pension fund in the country already is disclosing about their private-equity investments, that is their internal rates of return," said Judy Alexander, an attorney representing the plaintiffs.
Lawyers for the University of California system argued against disclosure on the grounds that internal rates of return -- the benchmarks by which venture-capital firms measure performance -- are trade secrets and exempt from the California public-record act under which the suit was filed. "The general partners who create and manage these funds treat [internal rates of return] as confidential and require investors to sign confidentiality agreements pledging not to disclose such information," the university said in its appeal.
The lower court rejected that notion on the grounds that much of the performance data were inconsistent and already had been released.