S.B. NO.



















SECTION 1. This Act is necessary to enable the Employees' Retirement System of the State of Hawaii (the "system") to efficiently maintain the confidentiality of information relating to alternative investments such as investments in private equity, private credit, and private real estate funds, consistent with competitive investment market best practices. This will help ensure that the system will not be disadvantaged as a competitive investor due to the public records disclosure requirements of chapter 92F, Hawaii Revised Statutes.

In order to address the system's unfunded liability and other financial needs, the system, as a prudent investor, engages in diversified investment, including high-yield private alternative investment funds. Due diligence into such investments requires that the system invest time and money for detailed proprietary and confidential information regarding the projected performance of each fund. If the system is required to disclose such confidential information, the system is disadvantaged as a competitive investor. Competing investors would be able to acquire, at no cost, the system's investment intelligence, resulting in oversubscription of the system's best investments, reducing the system's access. Further, to the extent that the system has disclosed or may be required to disclose information that the investment funds require to be kept confidential, some high-performing funds have been deterred from allowing the system to invest with them. In order to manage such risks, the system currently expends significant efforts in responding to requests for such confidential information.

To serve the public interest in monitoring the system's investment performance, the system already publishes non-confidential aggregate performance data for the entire system investment portfolio, in its "Hawaii ERS Quarterly Performance Report", which includes: (1) name of asset or strategy; (2) rate of return for the month, 3 months, fiscal year-to-date, calendar year-to-date, 1, 3, and 5 years, and inception to date; and (3) inception date. The system further publishes in its monthly Statement of Investments, private equity fund data on: (a) name of fund; (b) commitments; (c) contributions; (d) market value; (e) strategy; and (f) vintage year or year started.

This Act identifies certain specific types of alternative investment fund information the disclosure of which would likely put the system at a competitive disadvantage and, therefore, categorically exempts such categories of information from disclosure under chapter 92F, consistent with market best practices.

SECTION 2. Section 88-103, Hawaii Revised Statutes, is amended to read as follows:

"88-103 Records. (a) The board of trustees shall keep a record of all its proceedings which record shall be open to public inspection. It shall publish annually a report showing in detail: (1) the fiscal transactions of the system for the year ending the preceding June 30, (2) the amount of the accumulated cash and securities of the system, and (3) an actuarial valuation of the assets and liabilities of the system. The board shall submit the report to the governor and shall furnish copies thereof to the heads of the various departments of the State and county for their use and the use of the members employed therein.

(b) The board shall include in its annual report submitted prior to January 1 of each odd-numbered year: (1) a comparison of the investment performance of the system with the investment performances of the public employees' retirement systems of other jurisdictions [which] that have authority to make investments substantially similar to the investment authorized under section 88-119, and (2) a comparison of the funded ratio on June 30 of the preceding year with the funded ratios of the public employees' retirement systems of other jurisdictions.

(c) As used in this section:

"Alternative investment" means an actual or proposed investment by the system in a private equity fund, venture fund, hedge fund, fund of funds, absolute return fund, real estate fund, infrastructure fund, private credit, or other similar private market investments.

"Alternative investment vehicle" means the limited partnership, limited liability company, collective investment trust, or other legal structure of the alternative investment.

"Investment management agreement" means a contract to manage assets of the system.

"Limited partner advisory committee" means any limited partner or other advisory committee of an alternative investment vehicle.

(d) In response to any public records request pursuant to chapter 92F, or other law, the following documents relating to alternative investments are categorically exempt from disclosure under chapter 92F:

(1) Private placement memoranda;

(2) Fund agreements and related documents (including, without limitation, subscription agreements, management agreements, side letters, guarantees, credit facility agreements, participation agreements, and trust documents);

(3) Confidential presentations or recommendations made to the system;

(4) Due diligence memoranda and other due diligence materials (including due diligence questionnaires);

(5) Documents containing information on any portfolio company, real property, or any other assets held by the alternative investment vehicle;

(6) Financial statements and other documents containing financial information of a fund, or its general partner or manager, whether audited or unaudited, including but not limited to statements or information related to:

(A) Income statements;

(B) Balance sheets;

(C) Cash flows;

(D) Capital accounts;

(E) Investment rate-of-returns to include internal rate of returns and time weighted rate of returns;

(F) Cash or in-kind distributions;

(G) Carried interests;

(H) Management and other fees; and

(I) Return multiples;

(7) Confidential correspondence between an alternative investment vehicle, or its general partner, manager, advisor or limited partner advisory committee, and the system;

(8) Capital call and distribution notices;

(9) Limited partner advisory committee and limited partner meeting notices, minutes, and materials (including without limitation any materials distributed at such meetings);

(10) Investment management agreements; and

(11) Placement agent disclosures and similar documents.

(e) The foregoing categorical exemptions from chapter 92F are in addition to any other records that may be exempt from disclosure as information or records related to the management or investing of the funds of the system, the release of which would create a likelihood of substantial competitive harm to the system or the provider of the information, or impair the ability of the system to obtain investment opportunities or similar information in the future, or information or records that are otherwise exempt from disclosure pursuant to chapter 92F or other law."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.








Report Title:

Employees' Retirement System; Investment Records



Exempts certain specific types of alternative investment fund information from disclosure under chapter 92F, the disclosure of which would put the system at a competitive disadvantage and frustrate its legitimate government investment function.




The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.