Michigan pension bets big on venture

The State of Michigan Retirement Systems committed $335 million to five venture funds in the first quarter of 2020.

The State of Michigan Retirement Systems (SMRS) continued its push into venture capital during the first quarter of 2020, committing a total of $335 million to five funds, according to the pension’s June board meeting documents.

SMRS made its biggest bets on life sciences funds, which accounted for $200 million of the total. It committed $100 million each to new vehicles from Acorn Bioventures and Flagship Pioneering.

New York’s Acorn Bioventures invests in biotech companies across stages of company development, from seed to small-cap public companies. The firm was founded in 2017 by Anders Hove who was previously a managing general partner at Venrock. Acorn Bioventures closed its first fund with $199.5 million in commitments in March 2020, according to a regulatory filing.

Cambridge, Massachusetts-based Flagship Pioneering closed its seventh fund in April at $1.1 billion. The life sciences firm is best known for its investment in Moderna Therapeutics, which went public in December 2018 with a valuation of $7.6 billion. The drug discovery company is currently running the first human trial of a potential covid-19 vaccine.

The Lansing, Michigan-based pension system also committed $100 million to growth investor Insight Partners. The New York firm announced its ninth fund, its largest to date, on April 3 with $9.5 billion in commitments.

Finally, SMRS re-upped to two Lightspeed Venture Partners funds. The pension fund committed $10 million to Lightspeed Venture Partners XIII, an $890 million fund focused on seed, Series A and Series B rounds, and pledged $25 million to Lightspeed Venture Partners Select IV, a $1.8 billion fund for supporting the Menlo Park firm’s existing portfolio companies.  

Michigan’s venture capital assets rose from $1.42 billion at the end of Q1 2019 to $1.57 billion in Q2 2020, more than a 10 percent increase. 

Venture capital was the strongest performer in Michigan’s private equity portfolio over the one-year, three-year and 10-year time frames, returning 11.5 percent, 16.2 percent, and 21 percent, respectively.

SMRS, which manages $74.8 billion in assets, increased its private equity allocation target from 16.5 percent to 18 percent in December 2018. At the end of Q1 2020, private equity assets accounted for 21.2 percent of all assets, exceeding the target allocation by more than 3 percent.