Public Pension Investments
The Chamber supports authorizing the use of state employee pension funds for alternative investments in order to expand access to venture and seed capital. The Chamber has designated SB 402 as a scorecard issue for 2012.
Public Pension Funds and Alternative Investments
- Investment in alternative funds would help secure the highest returns possible for public workers by diversifying the state’s portfolio and increasing projected returns at the same level of expected portfolio risk.
- Georgia is the only state in the nation that does not allow its public employee pension funds to be invested in alternative investments.
- In a December 2011 survey of the nation’s largest public retirement systems, the National Association of State Retirement Administrators found the average asset allocation for alternative investments in FY 2010 was 9.8 percent.
- Public pension investments in alternative funds could also create additional venture capital in Georgia to help diversify the state’s economy and create clusters of business innovation to generate economic development.
The Economic Impact of Venture and Seed Capital
- The Kauffman Foundation ranks Georgia first in entrepreneurial activity in the nation, and the National Venture Capital Association ranked Georgia 13th in venture capital investment in 2010.
- However, Georgia Tech’s Enterprise Innovation Institute estimates that 92 cents of every venture capital dollar invested in Georgia companies comes from out of state.
- It’s estimated that 40 percent of the venture-backed companies in Georgia leave the state within five years due to inadequate access to local funding.
- SB 402, sponsored by Sen. Tim Golden, would allow the Employees' Retirement System of Georgia to devote up to 5 percent of the system’s assets to certain types of alternative investments, including venture capital funds.
- The legislation would require the retirement system to provide an annual report to the Governor and the chairpersons of the House and Senate Committees on Retirement detailing the performance of these investments.
- The legislation also would require the system’s Board of Trustees to adopt a code of ethics for the consideration of, investment in and disposition of alternative investments.
- Note: The Teachers Retirement System of Georgia is specifically exempt from this legislation.
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