BUYOUTS-Colorado pension launches in-state private equity fund

Wed Oct 24, 2012 3:43pm EDT

* To focus on co-investments

* Nevada, Indiana have similar programs

* Pensions under pressure to boost economies

By Gregory Roth

NEW YORK, Oct 24 (Reuters-BUYOUTS) - Another state pension has moved to help its local economy by launching a fund targeting in-state private equity and venture capital investments.

The latest effort comes from the $40 billion Colorado Public Employees Retirement Association, the state's biggest pension, which launched its Colorado Mile High Fund this month. The fund, which is likely to earmark as much as $50 million to businesses that are based in or that have a "nexus" in Colorado, will be managed by Credit Suisse Asset Management's Customized Fund Group.

According to Colorado PERA, the strategy is to invest in Colorado companies alongside private equity or venture capital sponsors; in doing so, the state is likely to save on management and performance fees that it would otherwise have to pay the sponsors as a direct investor in their funds.

"This is good for Colorado and for PERA," said Jennifer Paquette, the pension fund's chief investment officer, in a statement. "Colorado-based companies need an additional source of funding and, with the creation of the Colorado Mile High Fund, PERA will use our high investment standards to benefit our membership and Colorado's economy."

As the U.S. economy continues to struggle, many state pensions have come under pressure from legislators and chambers of commerce to use their capital to boost local economies. Dedicated in-state private equity programs have become a popular way to help achieve that goal.

Other pensions and endowments that have launched similar in-state programs include the Indiana Public Retirement System, which last month announced the creation of a $150 million program, and the Nevada Permanent School Fund, which chose advisory firm Hamilton Lane to manage its $50 million Silver State Opportunity Fund. Other pensions committing to similar efforts include the California Public Employees' Retirement System and the State of Wisconsin Investment Board.

Colorado PERA has $3.6 billion invested in private equity and venture capital as of June 30. That amounts to a 9.2 percent allocation, which is above the system's 7 percent target.

The pension fund provides retirement benefits to nearly 500,000 current and former Colorado state and local employees.