The Finland-based Local Government Pensions Institution plans to build a $125 million U.S. venture capital program with a fund-of-funds to be managed by Wellesly, Mass.-based Grove Street Advisors.
The portfolio will be weighted with technology funds managed by top-tier investment groups, mostly in Silicon Valley, as well as funds in Boston and Texas, says Catherine Crockett, a general partner with Grove Street. The portfolio will also include a number of health care funds.
Grove Street will invest Finland’s capital over the next three years, and once all the fund’s capital is committed, there will be at least 15 funds in the portfolio.
Finland’s Local Government Pensions Institution manages $17.7 billion for 900 local member organizations. It began investing in private equity funds in 1994, first in Finland, then throughout Scandinavia and later expanded into Europe. Its European private equity portfolio is valued at $1.1 billion.
It began investing in U.S. buyout funds in 1999.
“We increased our U.S. exposure in late 1999 with some buyout commitments, but venture capital was a new area for us and we were cautious getting in,” says Kimmo Lehto, the Local Government Pension Institution’s associate director.
The pension’s foray into the U.S. market is not just an evolution of its investment strategy, Crockett says, but its timing is meant to coincide with the fund-raising efforts of top-tier firms like Battery Ventures, Kleiner Perkins Caufield & Byers and Sevin Rosen Funds. All of them are expected to begin marketing new funds this year.
Lehto and Markus Pauli, the pension’s portfolio manager for alternative investments, have been meeting with U.S. venture firms since February.
Once Grove Street is successful in building relationships with these firms, the Finns will eventually take over the management of its own U.S. venture capital portfolio.