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Confidentiality Relating to Alternative Investments of PSERS and SERS

11.01.06

Governor Rendell signed House Bill 126 ("HB 126") and Senate Bill 592 ("SB 592") into law on October 27, 2006 and November 9, 2006, respectively.  These bills generally provide an exception from "right to know" disclosures for alternative investments (such as pooled investment funds) made by the Public School Employees' Retirement System ("PSERS") and the State Employees' Retirement System ("SERS").  Specifically, HB 126 applies to SERS and SB 592 applies to PSERS.

Under Pennsylvania law, PSERS and SERS are required to maintain records of their proceedings, which records are open to inspection by the public.  HB 126 and SB 592 create exceptions to the open records general rule to protect records, materials or data received, prepared, used or retained by the board of PSERS or SERS or their employees, investment professionals or agents relating to investments if, in the reasonable judgment of the board of PSERS or SERS, the release of such information would:

  • In the case of an alternative investment or alternative investment vehicle, involve the release of sensitive investment or financial information relating to the alternative investment or alternative investment vehicle which PSERS or SERS was able to obtain only upon agreeing to maintain its confidentiality;
  • Cause substantial competitive harm to the person from whom sensitive investment or financial information relating to the investments was received; or
  • Have a substantial, detrimental impact on the value of an investment to be acquired, held or disposed of by PSERS or SERS, or otherwise cause a breach of fiduciary duty by PSERS or SERS.

Notwithstanding the above protections, SB 592 (which applies to PSERS) goes a step further and provides that the below information regarding an alternative investment vehicle will be subject to public inspection.  There is no corresponding provision in HB 126 (which applies to SERS).

  • Name, address and vintage year of the alternative investment vehicle;
  • Identity of the manager of the alternative investment vehicle;
  • The dollar commitment made by PSERS to the alternative investment vehicle;
  • The dollar amount of cash contributions made by PSERS to the alternative investment vehicle;
  • The dollar amount of cash distributions received by PSERS from the alternative investment vehicle;
  • The net IRR of the alternative investment vehicle (subject to limited exception);
  • The aggregate value of the remaining portfolio assets attributable to PSERS' investment in the alternative investment vehicle (subject to limited exception); and
  • The dollar amount of management fees and costs paid to the alternative investment vehicle.

If you have any questions about the information contained in this Client Alert,  please contact Keith Kaplan (215-569-4143), Jon Katona (215-569-4222) or Mark Beaver (215-569-4769).


This information has been prepared by Klehr, Harrison, Harvey, Branzburg & Ellers LLP ("Klehr-Harrison") for general information purposes only.  It does not constitute legal advice, and is presented without representation or warranty as to its accuracy, completeness or timeliness.  Transmission or receipt of this information does not create an attorney-client relationship with Klehr-Harrison.  Parties seeking advice should consult with legal counsel familiar with the particular circumstances.