Missouri Mulls More In-State Measures –

The Show Me’ state may be showing more of its private equity pension dollars to in-state funds and funds that invest in Missouri-based companies. Missouri State Treasurer Sarah Steelman formed a special task force that is looking into ways that the state could foster a friendlier environment for venture capital and private equity funding. Among the initiatives the task force is examining is a program that would direct state pension funds to invest in funds that support Missouri-based businesses.

Steelman formed the 10-person Task Force on Increasing Access to Capital for Missouri Business in June and described using investment of public funds for businesses in the state as “key to the panel’s efforts.”

“Why should our money work in other states when it can be working here to directly benefit the citizens who pay these tax dollars?” Steelman said in a statement. She says that while the Missouri State Employees’ Retirement System (MOSERS) invests in private equity funds, it does not target investments towards funds that will back Missouri-based companies.

Since being formed in June, the panel has divided into two subcommittees. One of the subcommittees is to look at the issue of using state pension funding for capital programs and the other subcommittee is to look at other means of economic development.

Missouri has tried its hand with local economic development through its pension system before. In the 1980s, the state funded a catfish farm through MOSERS that went belly up. The state got its money back when the company went into receivership, says Mark Hughes, director of policy and communications for the Missouri State Treasurer’s office.

While the state learned a lesson from its initial ill-fated program, the problems of having companies wooed out of state persisted. “We’ve got a good emerging tech center in St. Louis,” says Hughes. “They get small companies up and they get lured away by incentives of other states.”

Marcia Mellitz, CEO of the St. Louis-based Center for Emerging Technologies and a member of the committee that is looking into pension investment programs, says that the new program would avoid any future catfish farm fiascos. “First, absolutely we will not be doing direct investing,” says Mellitz. “It’s not appropriate. What we would be looking at are funds making investments.”

The two subcommittees are to make their reports to the full committee later this month and Mellitz says that the task force’s aim is to have a program up and running in about six months.

Missouri is not alone in states turning to its pension system to spur economic development. In Massachusetts, State Treasurer Timothy Cahill has proposed an ambitious plan based on his own task force’s recommendations that would use up to an additional $600 million of pension investments in “economically targeted investments” to promote “affordable housing and economic development in Massachusetts.” According to the State Treasurer’s office, almost half of Massachusetts’ $36 billion pension fund is managed by Massachusetts-based firms.

MOSERS manages approximately $6 billion in capital. It most recently posted a yearly return of 12.6% with alternative investments posting a 21.3% return. About 5%, or $30 million, of the pension system’s assets are invested in private equity. MOSERS has invested as a limited partner in funds managed by Gateway Associates, InterVen Partners, Morgan Stanley Ventures, Summit Partners and TA Associates.