SACRAMENTO, Calif. – The California Public Employees’ Retirement System (CalPERS) in January carved out $500 million to invest in several new venture capital funds being launched by the investment bank Thomas Weisel Partners.
“Thomas Weisel is focused on backing high-tech companies in California and elsewhere, and this signals our interests in helping high-tech Californian companies, as well as benefiting from this growing sector of the economy,” said Pat Macht, a CalPERS spokeswoman.
The investment bank backs communications equipment, next generation services, Internet software, business-to-business opportunities and other growth companies, said Derek Lemke-von Ammon, the firm’s co-head of private equity. Thomas Weisel is considering launching up to four still unnamed new funds, which might include a fund-of-funds, an early-stage private equity fund, a mezzanine fund and an international private equity fund, all of which will back growth oriented information technology companies in the United States and internationally.
As the lead investor, CalPERS will invest up to $125 million or 25% of the total capital in each of the four funds, said Lemeke-von Ammon. He declined to name any potential limited partners, saying it was too premature to know who they might be.
The funds that CalPERS ultimately will invest in are in various stages of development. “Potentially, they may end up being involved in a mezzanine fund, an early-stage private equity fund, a fund-of-funds and an international private equity fund but they are in various stages of developments as concepts,” Lemke-von Ammon said. Thomas Weisel has already hired a manager for the fund-of-funds, targeted between $500 million to $1 billion, of which a large portion will be invested in funds that back Thomas Weisel Partners. “We want to establish stronger relationships with the strategic investors in our firm,” he explained.
The mezzanine fund is targeted at about $500 million, the early-stage fund at $300 million to $400 million and the international private equity fund at $300 million to $500 million. “This is really the early stage for all of this. All of these things remain an open subject right now,” he said, noting that TWP might combine the potential early-stage fund with its existing $1.3 billion Thomas Weisel Capital Partners LP, which was slated to close the second week of February, or it could decide to make early-stage investments out of the fund-of-funds, he said. “This money provides us with a critical mass, which will allow us to recruit a top notch team and define what we want our strategy to be in regards to these funds.” he said.
CalPERS, the nation’s largest public pension with assets totaling more than $165 billion, previously committed $100 million to Thomas Weisel Capital Partners LP. In addition to its most recent $500 million commitment, CalPERS also purchased a 10% stake in the investment bank. Subject to approval by its investment committee, the pension fund might also invest an additional $500 million with TWP to support the investment bank’s new business activity.
Meanwhile, CalPERS is looking for a new chief investment officer to replace Sheryl Pressler, who plans to step down at the end of February to become chief executive officer of Lend Lease Real Estate Inc. The pension invests about 11% of its $11 billion alternative allocation in venture capital.