Sources inform ''Globes'' that the new $50 million investment threshold set by the investment committee of California Public Employees Retirement System (CalPERS) for venture capital and private equity funds means that CalPERS will no longer directly invest in Israeli venture capital funds.
CalPERS is one of the largest institutional investors in Israeli venture capital. It has invested $130 million since 1998, including $70 million through Grove Street Advisors, and $60 million directly. CalPERS manages $230 billion in assets, and its private equity and venture capital investment plan totals $33 billion.
CalPERS initially invested a few million dollars in various funds, before increasing its investments in 2005. It currently has invested $2.5-50 million in Israeli funds, including Apax Partners, Carmel Ventures, Gemini Israel Funds, Giza Venture Capital, Israel Seed Partners, Jerusalem Venture Partners (JVP), Markstone Capital Partners Group LLC and Pitango Venture Capital.
CalPERS’ decision will be a major headache for Israeli fund managers. Carmel, Gemini, and Pitango, for example, plan to raise new funds over the next 18 months, and will have to reassess their relationship with CalPERS. This is because the funds may not raise more than 20% of a fund from a single investor, which means that they would have to raise $1 billion funds to meet CalPERS’ threshold - well above the usual size of an Israeli fund of $150-300 million.
A top venture capitalist told “Globes” today, “The smaller investments took up a lot of time. It seems that to keep investments in very early-stage countries in different areas, including Israel, will be carried out through consultancy firms that will receive allocations from CalPERS and manage the small investments. Investments in Israel will henceforth be handled by external parties managing money on CalPERS’ behalf.”
CalPERS’ direct and indirect investment in Israeli funds will also change because of changes within the funds themselves. Apax Israel, for example, no longer operates as a venture capital fund, so investment in it will be different. Sources added today that CalPERS will no longer invest in JVP through Grove Street, because of its change in investment focus and personnel changes.
CalPERS also announced a $400 million allocation to PCG, which manages $15 billion in assets, and makes investments on behalf of institutions. PCG might invest in Israeli funds on CalPERS’ behalf. Sources inform ''Globes'' that PCG representatives are due to visit Israel shortly, and have already arranged meetings with fund managers.
Published by Globes [online], Israel business news - www.globes.co.il - on May 1, 2007
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