calpers-presentation060607 by panapan0815


									California Initiative
Mission Statement

         The California Initiative will invest in traditionally
        underserved markets primarily, but not exclusively,
       located in California. The objective is to discover and
     invest in opportunities that may have been bypassed or
        not reviewed by other sources of investment capital.


 • To earn attractive risk-adjusted returns
 • As an ancillary benefit, to have a meaningful impact on the economic
   infrastructure of California Underserved Markets

Underserved Market Opportunity

             Underserved markets are less
           efficient and have the potential to
              provide superior investment


 • Companies located in areas where access to institutional equity
   capital is limited
 • Companies that employ workers who reside in economically
   disadvantaged areas
 • Companies with female and/or minority management

    California Initiative Partners
                                                        MIDDLE                  GROWTH/                 CORPORATE /
       SEED                   VENTURE                   MARKET                 EXPANSION                  BUYOUT

                                                                                                    §   Yucaipa
                                                                         §   Green Equity               Corporate
                      §    Pacific Community     §   Opportunity             Investors                  Initiatives Fund
                           Ventures                  Capital             §   Nogales Investors
                      §    American River        §   Provender Capital
§   Garage            §    DFJ Frontier

                                               Bank of America Fund-of-Funds

     Fund           Fund           Fund              Fund         Fund           Fund            Fund             Fund

History & Milestones
 May 2001    CalPERS Investment Committee approved the California Initiative
             § $475 million of commitment
             § 10 partnerships
November     First investment made by California Initiative Fund
November     Staff presented an initial update on the Program -
  2004         Approximately 21% of the Program’s capital invested
               Investment Committee directed staff to enhance reporting of
               the Program, including a thorough assessment of the ancillary
March 2005   Staff completed project design and subsequently engaged Pacific
               Community Ventures (“PCV”) and LP Capital Advisors
               (“LPCA”) to assess the ancillary benefits of the Program
December     Initial assessment and report completed by PCV and LPCA
  2005       Over 50% of the Program’s Capital invested

California Initiative Performance

Investment returns to date are less meaningful due to the young age of
the Program (i.e. the J-Curve Effect that affects all private equity fund
Results As Of                September 30, 2005       June 30, 2004
Total Cash In                $253.1 million (53%)     $99.5 million (21%)
Total Cash Out               $7.9 million             $5.3 million
Reported Value + Cash Out    $251.6 million           $74.9 million
Net Gain (Loss) 1            $(1.4) million           $(24.7) million
Multiple on Invested Capital 1.0x                     0.8x
Net IRR 1                    (0.4)%                   (22.4)%
1-Year Net IRR               16.3%                    (11.1)%

Ancillary Benefits Assessment
Underserved Market Benchmarks
● Companies located in areas where access to
  institutional equity capital is limited:
      ~ Companies located outside the top 100 postal codes for
        receiving venture capital investment. (These top 100 postal
        codes received 30% of venture capital investment dollars
        between 2000 and 2005.)

● Companies that employ workers who reside in
  economically disadvantaged areas:
      ~ Companies where at least 25% of California employees
        live in a zip code designated economically disadvantaged.

● Companies with female and/or minority
      ~ Companies where at least one officer (e.g. CEO, COO,
        CFO, CIO) is female or ethnic/racial minority.

Strong Presence in California
● Of 68 companies1:
      ü   48 are headquartered in California
      ü   51 employ a significant proportion of their workforce in California
      ü   37 have been in the portfolio for one year or more
      ü   Since investment, these companies have created nearly 2,500
          jobs, including nearly 600 in California

● CA Initiative companies employ over 5,000 Californians,
  including approximately 2,000 who live in economically
  disadvantaged areas of the state

● Over 170 distribution, retail and other facilities located
  across California
      Active California Initiative companies (as reported in the Initial Assessment Report)

             75% of California
           Initiative Companies
            are Headquartered
           or Have a Significant
                 Presence in

Comparison to Benchmarks
●   Of 68 companies, 65 are directly impacting underserved markets
●   Of the 48 companies headquartered in California, 45 are directly impacting underserved
●   Many companies reach underserved markets in multiple ways

Comparison to Benchmarks
Of the 68 Companies:
● 51 companies (75%) are headquartered in areas of US where access to
    institutional equity is limited; 35 of these are in California.
● 39 companies (57%) have at least one female or minority owner or officer
    (e.g. CEO, CFO, COO, CIO).
● 32 companies (47%) have a workforce where at least 25% of California
    employees live in disadvantaged areas.

Banc of America Capital Access Funds

Ø Invested in 8 private equity partnerships, 2 others
Ø All 10 partnerships contribute to meeting at least
  one California Initiative objective:
  • 7 focus on ethnic minority opportunities
  • 5 focus on employing workers from disadvantaged
  • 2 improving access to capital, capitalizing financial
    institutions that serve low income/minority communities
  • 8 have at least one female or minority partner
  • 8 have offices in California

California Initiative Summary
Ø Performance is improving
   ● Climbing out of the J-Curve
   ● Real value being created in the portfolio
   ● Still fairly early in Program’s life (limited liquidity to date)

Ø Partners continue to find attractive opportunities in CA

Ø The analysis and reporting of financial results and ancillary benefits of
  the California Initiative are greatly enhanced

Ø Staff will provide the Investment Committee with regular updates on
  financial and non-financial highlights of the Program

Ø Ancillary benefits assessment report to be completed annually

California Initiative: Case Study
   Company         Graphic Press (
CalPERS Partner    Nogales Investors
   Company         High end minority owned commercial printer in Commerce, CA
  Description      §   Received Corporate Plus Distinction-signifying top minority supplier status
                   §   Named by Fortune Magazine as a top minority owned business in the US
                   §   Named by Hispanic Business Magazine as Top 101 Minority -Owned Business
                   §   Strong Revenue Growth since Investment

 Meeting the       § Graphic Press is located in an area where access to institutional
  California         equity capital is limited
   Initiative      § Nearly 50% of the Company’s employees reside in economically
 Underserved         disadvantaged California communities
    Market         § 40% of the Co.’s officers are either female or ethnic minority
    Nogales        §   Actively utilized their network to refer new clients
Investors’ Value   §   Focused management on minority supplier opportunities
      Add          §   Implemented initiative to improve operating margins
                   §   Obtained significant third-party growth capital resulting in
                       workforce expansion (which is 70% minority)


To top