New Mexico Private Equity Investment Program€¦ · NMPEIP Q2 2016 Update Summary UPDATE Internal...
Transcript of New Mexico Private Equity Investment Program€¦ · NMPEIP Q2 2016 Update Summary UPDATE Internal...
New Mexico Private Equity Investment Program
Q2 2016 Review
October, 2016
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• Program is in compliance with the statute
– $266.5 million in net deployed capital versus a statutory cap of $408.02 million
– Individual company ownership concentration levels are below statutory caps
• Program’s net deployed capital represents 5.9% of the Severance Tax Permanent Fund (“STPF”), on schedule to achieve the SIC-approved long term target allocation of 5.0%
• Program financial performance continues to be adversely impacted by investments made before 2004
NMPEIP Q2 2016 Update Summary
UPDATEInternal Rate of Return
Fund Group 1 yr 3 yr 5 yr Inception
NMPEIP Aggregate 4.7% 7.9% 7.0% 0.0%
2004 to Present 6.5% 10.4% 8.2% 4.6%
Prior to 2004 -14.3% -8.2% 1.1% -6.3%
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NMPEIP Financial Performance Improvement1993-2003 vs. 2004-Present
Metric 1993-2003 2004-Present Difference
Internal Rate of Return -18.2% 4.6% +22.8%
Since Inception Returns $-56.5M $65.6M $122.1M
Distributions to the SIC $5.0M $142.0M $137.0M
Non-Program Investment Into NM-based Companies
$0.5B $1.5B +180%
Source: Invient
Program focused on economicdevelopment
Program focused on financial returnsAdvisor - Sun Mountain Capital
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Since 2004, NMPEIP Vintages Tracking National Benchmark Returns
• Since 2004, performance has tracked a national venture capital benchmark
– 63% of vintages are above median
• From 1993-2003, only 14% of vintages are above median
2004-Present Vintage1st quartile: 38%2nd quartile: 25%3rd quartile: 25%4th quartile: 12%
1993-2003 Vintage1st quartile: 0%2nd quartile: 14%3rd quartile: 29%4th quartile: 57%
NMPEIP v. National Benchmark
NMPEIP Preqin
Vintage Net IRR Quartile
1993 44.8% Second
1994 N/A --
1995 N/A --
1996 (0.9%) Fourth
1997 N/A --
1998 (20.6%) Fourth
1999 N/A --
2000 (11.9%) Fourth
2001 2.3% Third
2002 (2.5%) Third
2003 (21.1%) Fourth
2004 (4.0%) Fourth
2005 (2.4%) Third
2006 10.7% Second
2007 3.0% Third
2008 10.5% Second
2009 N/A --
2010 N/A --
2011 N/A --
2012 N/A --
2013* 1.44x First
2014* 1.48x First
2015* 2.50x First
2016** N/A --
*IRR considered not meaningful due to short time horizon so quartile is
based on multiple of invested capital
Source: Invient reporting (as of 06/30/2016) and Preqin Database
custom benchmarking (as of 06/30/2016)
Note: No fund commitments were made in years labeled "N/A"
Note: Fund Performance Benchmark composed of venture capital funds
based in North America and smaller than $300 million in size
Benchmark reviewed and approved by LP Capital Advisors and State
Investment Office staff
** There are not a significant number of 2016 Funds to create a benchmark
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Summary of Program Economic Impact in Q2 2016
NMPEIP Impact Summary as of 6/30/16
Total Investment in New Mexico Portfolio Companies
A) Investment by Funds with NMPEIP Participation $324,139,372
B) External Investment Caused by Funds with NMPEIP Participation $1,995,622,691
Total VC Investment in NM Companies $2,319,762,063
Investment Multiplier (B / A) 6.2x
Categorization of NM Portfolio Companies
Active Companies 35 47.9%
Companies Exited at a Gain 14 19.2%
Companies Exited at a Loss 24 32.9%
Number of Companies funded 73 100.0%
NM Economic Impact Q2 2016
NM Purchases $26,095,051
NM Payroll $27,667,520
NM Economic Impact $53,762,571
Total Current Full-Time Jobs 1,494
Average Salary of Jobs Created $74,076
Average Salary in New Mexico1$43,170
Source: Survey of participating NMPEIP fund managers and NM companies for active companies and most recent verified data for exited companies1 Source: New Mexico wage and salary disbursements and total wage and salary employees from the U.S. Dept. of Commerce,
Bureau of Economic Analysis
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73 New Mexico Companies
New Mexico Companies as of 6/30/16
Advent Solar Eclipse Aviation MIOX Skorpios Technologies
Agilvax Elisar Software Nanocrystal Southwest Med Tech
Altaview Technologies Enerpulse NanoMR Sundrop
Altela Entrada Noribachi Surfect Technologies
American Clay Exagen Diagnostics Nuvita TCI Medical
Amtech Figaro OnQueue Technologies Teucrium Trading
Aspen Avionics Growstone Patchwork Systems Tred
Avasca Holochip Phase-I TriLumina
Avisa Pharma Infantelligence POSLavu TruTouch Technologies
Azano InnovASIC Protalex VeraLight
Bioreason Intellicyt ProtoHIT Vertical Power
Boomtime Introbotics Puente Partners Vibrant
BounceChat Iosil Energy Quasar WellKeeper
Comet Solutions JackRabbit Systems Respira Therapeutics xF Technologies
Consolidated Energy Kinetisis RiskSense Zia Laser
Controlled Recovery Lumidigm SBA Materials ZTEC Instruments
Desert Power Mesofuel Seamless Medical
Dining Gift Services Metaphor Seattle Fish Company
Earthstone MicroOptical Devices Seclarity
Status Key
Active (35) Exited at a Gain (14) Exited at a Loss (24)
Note: NMPEIP participants and the SIC directly have invested in 71 New Mexico-based companies,
with 2 additional companies funded by SIC National Program participants
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Capital Invested by Sector: Active NMPEIP Program Sector Concentration
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Summary of Key Points
• Program is currently tracking to the pacing plan approved by the SIC
• We are evaluating potential new commitments for the Program
– Currently 4 funds are in advanced stages of due diligence for potential commitment from the NMPEIP
• Program financial returns are improving steadily from the 1993-2003 era
– Since 2004, NMPEIP investments have performed in line with national VC benchmarks and have produced a positive financial return for the NMSIC
• Program is having a positive impact on the New Mexico economy
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New Mexico Private Equity Investment Program Overview
• The New Mexico Private Equity Investment Program (“NMPEIP” or “Program”) was established in 1993 to make investments into venture capital funds which in turn invest into companies based in New Mexico
• From 1993-2003, the Program was managed as a differential rate (below market rate) program
• Since 2004, the Program has been managed with financial returns as the primary focus
– Fiduciary-based approach with economic development benefits as a secondary consideration
– “Prudent Investor” investment standard vs. differential rate investments
• Financial returns have improved since 2004
• With Sun Mountain as the Program Advisor no third party marketers or placement agents have been used and no placement fees have been paid
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NMPEIP Status Overview and Summary of Partnership CommitmentsAll Fund Commitment Summary Commitment Funded Percent NM Investment Value ($)
2Return
2Fund
as of 6/30/16 Vintage Dollars To Date Funded Invest 1 Realized Unrealized3
Total Multiple IRR Liquidated
ARCH Venture Fund II, L.P. 1993 $1.2 $1.2 100.0% $67.1 $4.3 $0.0 $4.3 3.53x 44.8% Yes
ARCH Venture Fund III, L.P. 1996 $4.0 $4.0 100.0% $0.0 $3.7 $0.0 $3.8 0.94x -0.9% In Process
CVM Equity Fund V 1998 $3.0 $3.0 100.0% $1.1 $1.7 $0.0 $1.7 0.58x -6.1% Yes
Murphree Venture Partners IV, L.P. 1998 $4.0 $4.0 100.0% $4.9 $0.1 $0.0 $0.1 0.02x -71.8% Yes
Tullis/Dickerson Capital Focus II, L.P.4
1998 $5.0 $5.0 100.0% $10.1 $2.5 $1.5 $4.0 0.81x -1.7% Yes
Valley Ventures II, L.P. 1998 $3.0 $3.0 100.0% $18.4 $2.6 $0.0 $2.6 0.87x -1.6% Yes
Vestor Partners, L.P. 1998 $2.5 $2.4 94.0% $0.0 $0.6 $0.0 $0.6 0.27x -16.4% Yes
International Venture Fund I, L.P. 2000 $5.0 $5.0 100.0% $9.6 $0.9 $0.1 $1.0 0.19x -12.3% Yes
Murphree Venture Partners V, L.P. 2000 $3.0 $3.0 100.0% $2.2 $1.0 $0.2 $1.2 0.41x -10.8% In Process
Red River Ventures, L.P. 2000 $7.2 $7.2 100.0% $12.8 $3.9 $0.3 $4.1 0.58x -12.0%
Tullis/Dickerson Capital Focus III, L.P.4
2001 $15.0 $15.0 100.0% $23.7 $13.9 $5.3 $19.2 1.28x 5.2%
Wasatch Venture Fund III, LLC 2001 $8.7 $8.6 99.0% $41.6 $4.6 $2.6 $7.2 0.84x -2.6%
Altira Technology Fund IV, L.P. 2002 $10.0 $10.0 100.0% $14.3 $14.1 $0.0 $14.2 1.42x 6.1%
Blue Sage Capital, L.P. 2002 $10.0 $7.7 76.9% $10.0 $25.7 $3.2 $28.9 3.75x 21.8%
ITU Ventures West I, L.P. 2002 $15.0 $15.0 100.0% $15.3 $6.0 $0.0 $6.0 0.41x -15.5% Yes
Valley Ventures III, L.P. 2002 $6.7 $6.5 98.0% $14.9 $1.5 $0.4 $1.9 0.30x -14.7%
New Mexico Co-Investment Partners, L.P.5 2003 $62.0 $62.0 100.0% $163.7 $13.3 $0.0 $13.3 0.21x -23.4% Yes
vSpring II, L.P.4
2003 $20.0 $20.0 100.0% $91.9 $0.0 $4.3 $4.3 0.22x -14.0%
Flywheel I, L.P. 2004 $15.0 $15.0 100.0% $52.8 $9.7 $6.2 $15.8 1.06x 0.8%
Verge I, L.P. 2004 $10.0 $10.0 100.0% $50.6 $3.9 $5.5 $9.4 0.94x -1.0%
Wasatch New Mexico Fund, LLC 2004 $12.0 $12.0 100.0% $47.0 $1.4 $2.8 $4.2 0.35x -12.3%
ITU Ventures III NM, L.P. 2005 $2.3 $2.3 100.0% $0.0 $0.1 $0.0 $0.1 0.04x -73.6% Yes
Psilos Group Partners IIIB, L.P. 2005 $15.0 $15.0 100.0% $28.8 $8.0 $12.1 $20.1 1.34x 5.4%
Village Ventures Fund II-B, L.P. 2006 $15.0 $17.2 114.6% $3.2 $13.4 $16.8 $30.2 1.76x 10.7%
NMSIC Co-Investment Fund, L.P. (Classic) 2007 $30.0 $29.8 99.3% $364.2 $7.1 $19.8 $27.0 0.91x -2.2%
NMSIC Co-Investment Fund, L.P. (Focused) 2007 $62.5 $62.5 100.0% $850.2 $1.9 $93.8 $95.7 1.52x 6.6%
vSpring III, L.P.4 2007 $15.0 $15.0 100.0% $13.2 $0.5 $13.2 $13.7 0.91x -1.4%
EPIC Venture Fund IV, LLC 2008 $10.0 $8.7 86.7% $10.0 $0.0 $15.0 $15.1 1.70x 10.5%
NMSIC Co-Investment Fund, L.P. (2013) 2013 $20.0 $17.0 85.1% $53.8 $0.2 $24.7 $24.9 1.44x 18.1%
NMSIC Co-Investment Fund, L.P. (2014) 2014 $40.0 $24.3 60.7% $45.6 $0.2 $36.4 $36.6 1.48x 57.5%
EPIC Venture Fund V, LLC 2014 $10.0 $0.0 0.0% $0.0 $0.0 $0.0 $0.0 N/M N/M
Psilos Group Partners III Subsidiary, L.P. 2015 $2.0 $1.2 60.0% $0.0 $0.0 $3.0 $3.0 2.50x 872.9%
Phoenix Venture Partners II, L.P. 2016 $10.0 $0.9 9.4% $0.0 $0.0 $0.8 $0.8 0.86x -79.9%
Program Totals $454.1 $413.5 91.1% $2,021.2 $147.0 $268.1 $414.3 1.00x 0.0% 10 of 30
Source: Invient reporting
Notes:
1) Includes both direct fund investments and caused to invest dollars into New Mexico companies. Sourced from Invient reporting, GP reporting and Sun Mountain Capital analysis
Variance from total external dollars in New Mexico companies due to exclusion of previously raised capital and accounting for overlapping caused to invest dollar allocations
2) Investment Values and Return calculations based upon asset values from 6/30/16
3) Fair Market Value as determined by Fund GPs under ASC 820 as of the report date
4) Firm managing the fund has changed name: Tullis/Dickerson is now called Tullis Health Investors, vSpring is now called Signal Peak Capital
5) New Mexico Co-Investment Partners, L.P. data includes one SIC direct investment for reporting purposes
6) EPIC Venture Fund V, LLC not included in performance calculations as the fund has not yet begun actively reporting to Invient
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Unaudited Performance Data as of 6/30/16
Number of Fund Commitments 30
Capital Committed (Total) $454.1
Capital Committed (Net of Dist.'s Received) $307.1
Capital Drawn $413.5
% of Capital Committed (Total) 91.1%
Distributions Received $147.0
% of Capital Drawn 35.6%
Outstanding Deployed Capital $266.5
Outstanding Deployed Capital as % of STPF 5.9%
Portfolio Carrying Value $268.1
Total Portfolio Value $415.1
% of Capital Drawn 100.4%
Portfolio Multiple of Invested Capital 1.00x
Portfolio IRR 0.0%
Note: Returns calculated using reported Carrying Values as of 6/30/16
and data provided by Invient
Severance Tax Permanent Fund ('STPF') currently $4,533.6 millionas of 6/30/16
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NMPEIP Carrying Value Quarter Over Quarter
NM PEIP Changes in Q1 2016 Reported Value
Early VC Later VC Buyout Total
Reported Valuation as of Q4 2015 $146.4 $110.6 $3.5 $260.5
Contributions to General Partners $7.4 $0.2 $0.0 $7.7
Distributions from General Partners ($0.2) $0.0 $0.0 ($0.2)
Change in Value $2.3 ($4.8) ($0.0) ($2.5)
Reported Valuation as of Q1 2016 $155.9 $106.0 $3.5 $265.4
Source: Invient reporting
NM PEIP Changes in Q2 2016 Reported Value
Early VC Later VC Buyout Total
Reported Valuation as of Q1 2016 $155.9 $106.0 $3.5 $265.4
Contributions to General Partners $5.2 $0.0 $0.0 $5.2
Distributions from General Partners $0.9 $0.0 $0.0 $0.9
Change in Value ($3.3) ($0.1) ($0.0) ($3.5)
Reported Valuation as of Q2 2016 $158.8 $105.9 $3.5 $268.1
Source: Invient reporting
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Disclaimer
The preceding presentation relies on information provided by third parties, including the New Mexico State Investment Council(“NMSIC”), NMSIC’s General Partners and/or Invient, NMSIC’s data provider. The analysis included herein is dependent on suchinformation being complete and accurate in all material respects. Additionally, analysis may utilize or involve forward-lookinginformation that is derived in part from longer-term historical data provided by third-party sources.
In addition, projected results, if any, are based on a number of assumptions, including returns, fund size, economic terms,targeted investment allocation and other factors. Due to various risks and uncertainties, the projections in this presentation maydiffer materially from actual results or change significantly if any one or more of the assumptions are changed. As such, unduereliance should not be placed on such information.
Economic development data including employment, payroll and dollars spent in the State of New Mexico is collected quarterlyfor both active companies in the NMPEIP as well as those in which portfolio funds no longer have an active interest. For activecompanies, Sun Mountain Capital Advisors conducts quarterly surveys of fund managers to collect economic development data.For companies no longer obligated to report to NMPEIP fund managers, data is based on the most recent and materially reliableof 1) last reported data, 2) direct outreach to companies to collect data or 3) independently verified data provided by third partyentities. Annually, Sun Mountain Capital Advisors reviews fund manager data submissions by directly contacting a sampling ofunderlying portfolio companies to verify accuracy of data.
Nothing herein is intended to serve as investment advice, a recommendation of any particular investment or type of investment,a suggestion of merits of purchasing or selling securities, or an invitation or inducement to engage in investment activity.
This report is solely for the use of NMSIC. No part of it may be circulated, quoted, or reproduced without prior approval fromSun Mountain Capital Advisors or the New Mexico State Investment Council.