Illinois Set To Invest in PE Funds

The state legislature signed a law last week allowing the State of Illinois to invest $60 million into private equity and venture capital funds over the next three years.

Illinois is the latest among a growing list of first-time investors in the private equity sector. In the last six months at least five other state investment boards and pension funds have announced plans that could pump more than $809 million of new fund commitments into the market.

For its part, Illinois plans to invest 1% of its $6 billion General Revenue Fund into private equity funds that are either based in Illinois or that have actively sought and funded deals there in the past.

“The State Treasurer [Judy Baar Topinka] felt that the state wasn’t doing enough to attract and retain technology. We were losing out to the surrounding states and the coasts,” says Martin Noven, deputy chief of staff for law and policy in the Illinois State Treasurer’s office. Last year 150 Illinois-based startups received $1.4 billion in venture funding, according to Venture Economics. There are 171 active private equity investors in the state.

With bipartisan support and unanimous approval in both houses of the Illinois State Legislature, the bill is meant to both stimulate statewide economic development and boost the returns of the General Revenue Fund, the state investment fund managed by the State Treasurer’s office.

“When we first sought the allocation, it was a general development initiative,” says Noven. “Now we need to look carefully at investment returns. The two are not mutually exclusive. We do hope to accomplish both. Good rates of return are good for business.”

Illinois has not yet made a single private equity investment. It is currently seeking an advisor to develop its investment strategy, legal counsel to negotiate its investments and an investment review committee that will likely include representatives from state economic development agencies, state university officials and local venture capitalists.

Some details, however, have already been determined. The State’s commitment into a single fund will not exceed more than 10% of the fund’s total value. No more than one-third of the designated investment capital will be deployed in a single year. And, the State Treasurer’s investment staff investments will oversee and manage the private equity investments.

Contact Carolina Braunschweig