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The University of California's $8 billion question mark

August 5, 2013: 4:03 PM ET

UC-SealThe University of California has invested billions into private equity funds. Does it know the results?

FORTUNE -- The University of California has committed more than $8 billion to approximately 200 private equity and venture capital funds, but the school doesn't know how any of those investments are doing. Or at least that's the line they're feeding me.

UC is legally required to publish underlying performance data from its alternative investment portfolio, including fund-level internal rates of return (IRRs). The information available on its website, however, only is valid through Sept. 30, 2012.

Such data often lags by a quarter or two, but this is extreme. The Oregon State Treasury, for example, has published data through the end of Q1 2013. The University of Texas (UTIMCO) has provided data through the end of February 2013. The California State Employees' Retirement System is through Dec. 31, 2012.

So I recently rang up UC, assuming the dated data was just a clerical oversight that could be easily rectified. Spokeswoman Dianne Klein, however, told me that "there is a long delay in receiving the information from our outside consultant who calculates the IRR returns. It probably will not be until September before new returns are posted."

That outside consultant would be Cambridge Associates, whose other clients happen to include the aforementioned UTIMCO. More importantly, Cambridge Associates currently publishes IRR benchmarks through Q1 2013 on its own website. Pretty sure it calculates those figures by using underlying data provided by clients like UC, so it's hard to imagine that they got to top-line figures without doing the underlying math.

RELATED: University of California loses investment chief

So last month I asked Klein for a quick interview with UC's acting chief investment officer to clear up what I assumed was some sort of miscommunication. She never replied, leading me to place a new call today. Klein suggested that part of the delay is because UC must "clean up" some of the data that comes from the fund managers and/or Cambridge Associates (it wasn't entirely clear), but then hung up on me when I inquired further. No reply yet to a follow-up email, in which I asked specifically if CA had received any underlying performance data from Cambridge.

Cambridge Associates said that it cannot discuss client matters without first receiving approval from said client. Hopefully Klein doesn't hang up on them...

To me, the issue here is simple: The University of California is a public institution that reported $8.4 billion of commitments to alternative investment funds through Sept. 30, 2012 (more than $6 billion of which had already been called). Either it is violating its legal obligations by not publishing timely performance data on those investments, or it is violating its fiduciary duties by not knowing how those specific funds are faring.

The former is the far lesser of those two evils, but UC unfortunately insists it's the latter. Glad I'm not an alumni. Or a California taxpayer.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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