Connecticut mulls $100 million for VC funds and startups

Connecticut State Treasurer Denise Nappier is mulling a $100 million re-up to Constitution V Fund, which invests in venture capital funds.

The fresh commitment would create two additional investment pools in the existing Constitution Fund V, according to documents from the treasurer’s office. 

The $150 million Constitution Fund V, split into two parts called Series A and Series B, was created as an evergreen limited liability company, giving the pension system more control and flexibility over its venture capital investment program in 2016, pension documents said.

Series A was allotted $130 million and Series B was allotted $20 million at the time. 

The new $100 million Constitution V re-up would be used to create new programs called Series C and Series D. The pension system may commit $75 million to Series C to be invested in venture and growth-stage funds, and $25 million to Series D for co-investments in late- and growth-stage companies located in Connecticut, document said.

The proposed Series C strategy is somewhat similar to that of Series A. However, unlike Series A, which made commitments to only North American managers, Series C will commit to international managers. Additionally it will concentrate on healthcare and technology investments. 

Series D will follow the strategy of Series B. Most of the co-investments will be in companies core to Connecticut’s economy, such as those working in information technology, life sciences, financial services, advanced manufacturing, clean technology and aerospace. 

Constitution V’s Series A capital was fully committed to 28 underlying venture capital and growth-stage funds as of June 30, 2018.

Of the $20 million set aside for Series B, $7 million was invested in R4 Technologies, which is working on artificial intelligence, and eVariant, which makes customer relationship management software for healthcare providers.

The $30 billion Connecticut Retirement Plans and Trust Funds has five Constitution funds, and four of these are managed by Fairview Capital.

 A total of $642 million was invested in 108 funds across the four Constitution funds, as of Dec 31, 2017.

The four Constitution funds produced a net internal rate of return of 11.8 percent and net total value multiple of 1.7x for the period, the treasury documents said.  

Annual venture capital investments in Connecticut have ranged between $150 million and $350 million per year. From a high of 65 investments in 2011 and 64 investments in 2014, investments dropped to 33, 40 and 38 in 2015, 2016 and 2017 respectively.

The Connecticut pension system had a 18.2 percent allocation to venture capital in its private equity portfolio as of Dec 31, 2017.

Action Item: Read more on Connecticut’s performance here https://bit.ly/2usCaTz