By David G. Barry
Venture capital has long been an
alluring, but tough, sector for public pension funds to navigate. Slow approval
processes and sizable capital deployment needs often have made it difficult for
such funds to get into top VC firms.
Massachusetts Pension Reserve Investment Management (PRIM) has made a
move that it hopes will make it more “agile” and, in turn, competitive in
investing in the asset class.
At its May 3 meeting, PRIM’s board approved giving Chief Investment Officer Michael
Trotsky final approval over new VC commitments.
The $101 billion pension fund is not new to venture investing. In fact, as of
September, it had about $2.7 billion, or 16% of its private equity allocation,
in venture capital. Venture firms whose funds PRIM has backed include Battery
Ventures, CRV, Flagship Pioneering, Index Ventures, NEA and Union Square
Ventures.
However, in their presentation to the board, Helen Huang, a senior
investment officer, and Michael McGirr, director of private equity, said
the “enhanced” approval process will enable PRIM to “align decision-making”
with investing in funds that are the best fit for the fund’s strategy and
program objectives. In their report, they added that “agile processing and
timely decision is a key differentiation for LPs competing for allocations.”
Under the new plan, PRIM will look to beef up its venture capital program by
backing funds of its “core managers,” gaining access to new core VCs and
building a portfolio of emerging managers.
New VC commitment will not exceed 20% of the private equity annual commitment
budget. That would equate to no more than $660 million of the $3.3 billion 2022
private equity investment plan. PRIM would not invest more than $75 million in
any single VC fund and there would be no co-investing.
News of the change came as McGirr also told the board that PRIM expects PE
returns to drop in 2022 – perhaps not a surprise given that the asset class has
produced 50% returns for the year through March 31.