A move to put state pension money into Florida tech companies has taken off, with the investment increasing six-fold in size in three years and growing to $500 million, but it's still hard to tell if it had its intended effect ofboosting the state's economy, a state review has found.
Lawmakers in 2008 created the Florida Growth Fund with the aim of investing some of the state's massive pension fund in high-tech startups and growth companies here in Florida. The thinking was that the retirement fund right now worth $121 billion -- could serve as a sort of venture capitalist to help kick-start certain companies that might boost the economy.
The investment of up to 1.5 percent of net state retirement system assets in technology and high-growth businesses with significant presence in the state is "authorized," not required by the legislation. But in 2009, the State Board of Administration, which invests the pension fund and other state holdings, established the Florida Growth Fund, which under the new law was allowed to put up to $250 million into such companies. The board selected Philadelphia-based Hamilton Lane to manage the investments in the growth fund.
As of Oct. 28, 2011, the Florida Growth Fund had invested $176.5 million in 15 technology and growth companies and 11 private equity funds, the Legislature's Office of Program Policy Analysis and Government Accountability says in a new report. That's up from the initial investment of just $26 million in three firms when OPPAGA looked at the fund at the end of 2008.
And based on the fund's performance, and perceived prospects for future investment opportunities, the SBA is planning to put more money in, authorizing the investment of an additional $250 million, the OPPAGA report said.
The firms have created jobs 451 since the fund's inception, OPPAGA said.
"However, additional information is needed to conduct a comprehensive analysis of the investments direct and indirect economic benefits," the auditing agency said. "This data includes average employee wages, revenues, and capital investments." OPPAGA said the fund managers had agreed to try to produce the information for future evaluations.
OPPAGA also noted that it's hard to tell how much of the job growth was directly related to the investments, or might have occurred regardless.
So how are the investments doing?
Altogether, the SBA has seen a net internal rate of return of 23 percent since the fund's inception though it still holds the investments, so it hasn't realized the gain.
While some of the money in the fund goes directly into high-tech or high-growth companies -- the first batch of investments included a telecomm company and a central Florida waste-management company much of it is also invested in other private equity funds that invest in high-tech and -growth companies.
The fund's portfolio is diversified by sector, including information technology, digital media, and life sciences, according to the contract fund manager.
The largest investment so far made by the fund is a $15 million stake in a Tampa Bay-area company that provides services to the wireless telecommunications industry. The fund also has $14 million in a Jacksonville marketing agency, and $10 million in a Coral Gables aircraft parts and leasing business. The report doesn't give the name of any of the firms. The fund also has put $15 million each into three Florida private equity funds, along with several other similar, but smaller, investments.
The waste management company that the fund invested in back in 2009, which is based in Longwood, has created the majority of the jobs credited to the firms. OPPAGA calculates that the company has created 318 jobs. That company also hasn't been named, but Longwood is home to Waste Pro USA, one of the nation's fastest growing recycling and trash collecting companies.
