SACRAMENTO, Calif. - Texas Pacific Group closed its second fund this spring, raising $2.5 billion.
The biggest investor in TPG Partners II - which exceeded its $1.5 billion target by $1 billion - was the $25 billion Oregon Public Employees' Retirement Fund, Salem, which committed $300 million.
One big investor that didn't get into the popular partnership was the California Public Employees' Retirement System, which wanted to invest, said Hal Brown, investment officer for the $118 billion pension fund.
Mr. Brown declined to elaborate on why CalPERS didn't get into TPG II, but answers to that question might come Aug. 18 when CalPERS' investment committee makes a recommendation to the full board on hiring an alternative investment management consultant.
The finalists are incumbents Hamilton Lane Advisors Inc. and Pacific Corporate Group Inc., according Brad Pacheco, a spokesman.
Pacific Corporate Group was assigned to evaluate TPG II for CalPERS, and guide the pension fund into the partnership.
The oversight raises numerous questions about how the California system - which made it known early in TPG's fund-raising effort that it wanted in - failed to invest. PCG also represents the Oregon system, and that fund's commitment to TPG II represented a six-fold increase of its investment in the partnership's first fund.
David Graus, managing director with Pacific Corporate Group, declined to discuss CalPERS and TPG II.
Also at the Aug. 18 meeting, the investment committee is expected to recommend to the full board a co-investment consultant and a consultant that will source independent investment deals.
The finalists for co-investment consultant are Kleinwort Benson, Hamilton Lane, and PCG; Kleinwort Benson and PCG are finalists for the independent deal assignment.
N.Y. fund broadens scope
ALBANY, N.Y. - The $90 billion New York Common Retirement Fund is joining the growing ranks of large pension funds that want to take advantage of opportunities offered by smaller limited partnerships.
To that end, the pension fund initiated a search for a captive fund-of-fund adviser in June.
Larger funds, particularly public ones, find it difficult to identify, invest in and monitor small partnerships that raise between $100 million and $500 million. These investors generally prefer larger deals, but they also realize there are opportunities to exploit.
The New York City Employees' Retirement System and the California Public Employees' Retirement System both are considering similar programs (Pensions & Investments, May 12).
The captive partnership essentially operates as the fund's own general partner, identifying, evaluating and investing in the smaller partnerships.
"It will provide us with access to an area of the market we don't typically address, small partnerships under $500 million but over $150 million," said Jeffrey Gordon, a spokesman for state Comptroller H. Carl McCall, the sole trustee of the state pension fund.
Mr. Gordon said that the adviser hired would look at venture capital, leveraged buy-outs and opportunistic partnerships not focused on venture capital or LBOs.
Hedge funds and energy exploration partnerships need not apply, said Mr. Gordon.
Setting a fast pace
SAN JOSE, Calif. - Venture capital partnerships are on their way to another record year of making investments in companies, according to Coopers & Lybrand's Money Tree Survey.
The pace through the first half of 1997 is ahead of last year's record pace, which resulted in $10.1 billion committed to venture capital
Venture capital-led equity investments exceeded $5.7 billion (1,270 financings) during the first half of 1997, surpassing the $5.3 billion raised in the first half of 1996 (1,073 financings).
In the second quarter, $3.2 billion was invested in 684 U.S. venture-backed companies, surpassing the previous record of $3 billion in 584 financings in the second quarter of 1996.
Information-technology investments drove the second quarter's strong showing, accounting for nearly 45% of the total investment dollars and nearly 50% of the deals. Internet-related investments, alone, totaled $612 million in 134 financings, a substantial increase in investment from the previous quarter.
Venture capitalists put 70% of their investment money into initial financings, defined as companies new to the portfolio of the venture capital firm.
The survey's scope was broadened in the second quarter to include investments made by U.S. venture firms in foreign-based companies.
During the quarter, an additional $235 million was invested overseas, with Israeli companies receiving the largest number of financings.
The number of initial public offerings is down from 1996's torrid pace, but today's more reasonable valuations have drawn more investment, said James D. Atwell, San Jose-based national leader of Coopers & Lybrand's venture capital industry group.
California received the lion's share of venture capital funding in the second quarter of 1997, $1.1 billion or 36% of the national total, which equaled its share in the second quarter of 1996.
In the second quarter, the three leading industry sectors for venture capital investment were software, communications and medical devices.
Software companies the leading recipients of venture capital investment, received $672 million, or 22% of the total.