UC Forced to Disclose Private-Equity Returns

The University of California on Thursday failed to persuade a judge to reconsider a ruling that forces it to disclose returns on private-equity investments, one day after Sequoia Capital expelled the university from its funds over the issue.

The university, with $53.2 billion in assets under management, said the disclosures would prevent its endowment and pension plans from investing in venture capital funds that object to disclosing their performance figures.

Sequoia told the university in a letter that the information allows competitors to profit from its investments.

Universities are under pressure to disclose more data about their investments in the wake of scandals at Enron Corp. and WorldCom Inc. Managers of venture capital funds say disclosure of their holdings would allow competitors to gain an advantage and could mislead investors expecting quick profits.

The rules are that returns on venture capital investments at public universities should be public, Judge James Richman said at a hearing in Oakland.

He also said he wasn’t persuaded by the university’s complaints that Sequoia, one of 93 private equity funds the university invests in, had “pulled the plug.”

David Russ, the university’s treasurer, said the university’s $110-million investment in funds managed by Sequoia have returned $508 million. That information is public, he said.

“Our portfolio companies are hurt when sensitive information about their activities becomes available to competitors,” said Michael Moritz, manager member at Sequoia, in a letter to the university Wednesday. “The venture capital industry is damaged when alluring performance information attracts billions of dollars of hot money seeking quick returns.”

Jerome Falk, an attorney for the university, told Richman that returns on investments are protected by trade-secrets laws.

“To be excluded from these funds is going to cost the university hundreds of millions of dollars,” Falk said. The university plans to appeal Richman’s ruling.

On July 24, Richman ordered the university to disclose the returns after a group that includes a union representing university clerical employees sought the information in a lawsuit.