Vermont May Include PE in State-Targeted Program

The $3.3 billion Vermont Pension Investment Committee may make commitments to private equity funds as part of its Economically Targeted Investments Program, which seeks investment opportunities that will benefit Vermont’s economy.

The committee invests money on behalf of three state pension funds: the State Teachers’ Retirement System of Vermont, the Vermont State Employees’ Retirement System and the Vermont Municipal Employees’ Retirement System. Responses to the RFP were due June 25, and winners will be chosen on August 20.

There are no stated limits to private equity investments in the ETI program, beyond the 2 percent to 3 percent allocation limit to alternative investments set for the participating retirement systems. The private equity allocation target is not fully funded for any of these systems. Allocations to recipients may rise and fall over time.

Vermont Pension Investment Committee expects to award commitments to buyout firms, venture capital firms, securities investment managers, financial institutions, insurance companies, real property investment managers, as well as not-for-profit corporations and foundations. The goal of the program is to help finance small and medium-sized businesses in the state, and to provide housing for poor and middle-income people. The state seeks a market rate of return commensurate with the assumed risk.

Applicants that manage commingled funds must demonstrate that a substantial portion of the proposed investment will be done within the state. If the applicant proposes loan pools as the investment product, the loan pools must consist primarily of Vermont loans.

The Vermont Pension Investment Committee adopted the Economically Targeted Investments Program in 2006, but no investments in the program have been funded to date.