A chief investment officer of one Californian pension fund with a substantial private equity program said last week that the fund has already lost out on opportunities with GPs that didn’t want to comply with California’s fee transparency law.

California’s rules on fee reporting — which came into effect last year — require its public pensions to “make specific disclosures regarding fees and expenses in connection with limited partner agreements.”

As the bill was being passed some pensions expressed concern it would limit their investment options as managers might choose to take their business elsewhere rather than disclose more information.

The general direction of the asset class is toward transparency – be it fees and expenses or other elements of the GP-LP relationship, such as environmental, social and governance issues, said David Fann, president of TorreyCove Capital Partners, a San Diego-based advisory firm, at a recent emerging markets private equity conference in Washington DC.

“I know more public pensions are expecting a greater fee and carried interest disclosure. I think anybody that’s on the political side of the equation, treasurers — or anybody that’s politically minded — are looking for more transparency,” Fann said.

However, because institutional appetite for private equity is strong, GPs can be picky about who they do business with. Fann estimates that 5-10 percent of GPs are saying no to LPs who want those various fees made public.

One chief financial officer at a general partnership told me his firm is willing to comply with additional disclosure requirements, but there are limits and consequences.

“I expect GPs to continue to be more transparent, particularly as the various systems providers make it easier to meet the requirements in an automated manner, and we prefer to — within limits — be transparent,” he said. “However, I agree that faced with a choice, even if we might do full disclosure, we’d likely lean to the LP with less stringent limited partnership agreement/side letter requirements.”

Taking one’s business elsewhere is, particularly in a buoyant fundraising market, a temptingly straightforward solution for GPs who don’t want to get granular on fees. However, there is a downside.

“It only happens in cycles like we’re in right now, where the supply of capital far exceeds the manager capability of taking it all,” Fann pointed out. “But I think people are being short-sighted because there will be a down-cycle where California capital will be important.”

It’s always worth thinking about the long game.