Asset Allocation and Administration As I somberly contemplate the possibility of both Pedro and Manny playing for the Mets next year, a few quick notes: 1. The California Public Employees' Retirement System (CalPERS) has reduced its target allocation to private equity from seven percent to six percent. For some context, CalPERS had $21.1 billion in 416 active private equity commitments as of June 30, 2004, which makes it the world's largest investor in the asset class. Within that total are 74 fund commitments of over $100 million, including a $500 million promise to PCG Corporate Partners (of which nearly $200 million was called down as of June 30). Since launching its private equity program, fully-realized investments have returned 19.1%, or a 1.6x ROI. It is important to note, however, that the performance data will certainly be skewed downward once bubble-era funds mature. CalPERS' official statement on the reduction is that "investors should not misinterpret this action as a withdrawal from. private equity." Instead, it is part of a larger asset reallocation that also includes a 1% decrease in real estate targets, and 1% increases in both domestic and international equity portfolios. "It is a reflection of the success of our real estate and private equity programs to take profits and reallocate assets to other parts of our portfolio," said Rob Feckner, chairman of CalPERS' Investment Committee, in a prepared statement. What Feckner doesn't say, however, is the CalPERS is partially hedging against the possibility that it will be shut out of private equity funds with greater regularity, due to recent transparency battles. It already has lost future access to a handful of existing VC relationships, and now even some LBO firms are said to be reconsidering their public money policies, particularly as they relate to disclosure-friendly states like California and Texas. When covering the CalPERS vs. CFAC settlement last week, CalPERS spokeswoman Pat Macht told me that the system is now considered by many private equity firms to be a "FOIA client," which she equated with a scarlet letter. Moreover, she mentioned that the end result could be fewer CalPERS investments in private equity funds. No idea if this particular allocation reduction was what she was referring to, but the end result is the same. 2. Greg Prow has left his chief operating officer and managing director position with Mobius Venture Capital. The news was first reported by PE Insider, which suggested that the move was related to Mobius' decision to hold off on raising its seventh fund until the middle of next year. Prow, however, says that his decision was rooted in the firm's reduced size, rather than in its postponed fund-raising plans. Mobius has lost several managing directors - including Bill Burnham, Carl Rosendahl and Scott Russell -- since closing its $1.5 billion sixth fund in 2000, and later cut that fund size by $250 million. Moreover, it only plans to raise between $300 million and $400 million for the next fund, with almost all of the commitments expected to come from existing limited partners. In other words, Mobius no longer had much need for a full-time, in-house administrative partner. He possibly could have switched over to the deal side, but wasn't interested. Prow has not yet formalized his future plans, but is considering several VC and non-VC-related opportunities. 3. A bunch of you have asked about the identity of the bi-coastal firm whose fund target has been slashed from $2.5 billion to $1.5 billion. I'll discuss it next Monday, after the story appears in the print edition of PE Week. 4. Last chance to submit any 2004 People Moves, for lists that will run in Venture Capital Journal and Buyouts, respectively. If you changed jobs but it didn't get noticed in the Wire, please let me know.
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The California Public Employees' Retirement System (CalPERS) has reduced its target allocation to private equity from 7% down to 6 percent. It also has expanded its acceptable exposure range from 5%-9% to 3%-9 percent. The moves are part of a larger asset reallocation plan, which also include one percent increases in U.S. and international equity portfolios, and a one percent decrease in real estate programs. In other CalPERS news, the system has instituted a privatization policy for future private equity investments, whereby CalPERS-supported funds will be unable to invest in companies that outsource public sector jobs. www.calpers.com Ajit Shah is leaving Worldview Technology Ventures, where he has been a general partner since 2000. The firm has declined comment on his pending departure. www.worldview.com Daniel Pelosi has been convicted of murdering Theodore Ammon, a onetime KKR partner best known for helping to orchestrate the $26 billion buyout of RJR Nabisco. He later founded Chancery Lane Capital. Pelosi had been having an affair with Ammon's estranged wife Generosa, and could face 25 years in prison.
Casero Inc., a Toronto-based developer of software solutions to broadband service provider, has raised US$7.5 million in first-round VC funding. Highland Capital Partners and Argo Capital co-led the deal. www.casero.com Neotropix Inc., a Malvern, Pa.-based drug company focused on cancer, has raised $10 million in Series A funding. Investors included The Aurora Funds, Quaker BioVentures and VIMAC Milestone Medica Fund. www.neotropix.com Optaros Inc., a Cambridge, Mass.-based consulting and systems integration firm, has received an undisclosed amount of startup funding from Charles River Ventures and company founder and CEO Bob Gett. www.optaros.com Arryx Inc., a Chicago-based nano-manufacturing company, has raised approximately $10 million in Series D funding. Investors included Draper Fisher Jurvetson, Nanostart AG, LCMH Technology Investments and Ventures Midwest. LaSalle Street Securities helped place the deal. Arryx has raised approximately $17 million in total VC funding since its 2000 inception, with other shareholders including Fahnestock Venture Capital Fund, ARCH Development Corp. and Arryx-MDGP Investment GP. www.arryx.com Enuclia Semiconductor Inc., Beaverton, Ore.-based developer of semiconductor technologies for digital televisions, has raised $5.3 million in Series A funding from Sevin Rosen Funds and BA Venture Partners. www.enuclia.com LDR Spine USA Inc., an Austin, Texas-based provider of fusion and non-fusion technologies to spinal surgeons, has been formed by, Austin Ventures, LDR Medical, the Rothschild Group and PTV Sciences. IQuate, an Ireland-based provider of corporate governance software, has raised 700,000 euros from Executive Venture Partners and Enterprise Ireland. www.iquate.com Pinnacle Taxx Advisors LLC, a White Plains, N.Y.-based provider of tax preparation and financial planning services, has raised $6 million in VC funding. Edison Venture Fund led the deal with a $4.5 million commitment, and was joined by Ovation Capital Partners. www.pinnacletaxx.com Galileo Genomics Inc., a Montreal-based drug target discovery company, has raised Cdn$11.1 million in additional Series B funding. This caps the round at over Cdn$50 million, including debt. Solidarity Fund QFL led the final tranche, and was joined by return backers like HBM BioVentures, MVI and Biofund. In other company news, Galileo has changed its name to Genizon BioSciences Inc. www.galileogenomics.com Digital Orchid, a San Diego-based, has received a $2.5 million strategic investment from Qualcomm Ventures. www.digitalorchid.com Atraverda Ltd., a Manfield, UK-based, has raised GBP 4.4 million in new VC funding, including a GBP 900,000 grant. www.atraverda.com AdPay Inc., a Littleton, Colo.-based provider of P2P and B2B e-commerce solutions for newspapers' online classifieds, has raised an undisclosed amount of Series A funding from Appian Ventures and FFP Holdings. www.adpay.com TeleCIS Wireless Inc., a Santa Clara, Calif.-based leading developer of broadband wireless chipset technology, has raised $4 million in Series B funding led by ATA Ventures. www.telecis.com Orthogon Systems, a UK-based provider of carrier-class, point-to-point broadband wireless systems, has raised $8 million in new venture funding. Motorola Ventures led the deal, and was joined by fellow new investor Lighthouse Capital Partners. Return backers included Atlas Venture and The Carlyle Group. www.orthogonsystems.com.
The Thailand Equity Fund, a $245 million private equity vehicle sponsored by Lombard Investments, has acquired a 25.5% stake in Siam A&C Company Ltd., a Thai consumer finance company operating under the "Easy Buy" brand. No financial terms were disclosed. www.easy-buy.net CITC Japan Partners has acquired a 45% stake in Shinwa International Holdings Ltd., a Japan-based producer of automotive radio components. No financial terms were disclosed.
The Stanley Works (NYSE: SWK) has acquired ISR Solutions Inc., a Chantilly, Va.-based provider of electronic security integration for both the federal government and commercial customers. No financial terms were disclosed. ISR Solutions had raised over 417 million in VC funding since its 1998 inception, from firms like Carlyle Venture Partners, Centura SBIC and Fairfax Partners. www.stanleyworks.com www.isrsolutions.com Xyleme Inc., a San Diego-based developer of XML databases and content applications, has acquired substantially all the assets of Novizio Inc., a Colorado-based developer of e-learning and technical documentation software. No financial terms were disclosed. Xyleme has raised around $15 million in VC funding from firms like DB Investor and Viventures. www.xyleme.com Xanodyne Pharmaceuticals Inc., a Florence, Ky.-based drug company, has acquired PX Pharmaceuticals Inc., a drug company that has developed a vaccine to prevent recurring urinary tract infections in women. No financial terms were disclosed. Xanodyne has raised approximately $40 million in total VC funding since its 2001 inception, from firms like Essex woodlands Health Ventures, Blue Chip Venture Co. and HealthCare Ventures. www.xanodyne.com MTM Technologies Inc. (Nasdaq: MTMC) has acquired the assets and business operations of Vector ESP Inc., a Houston, Texas-based provider of enterprise computing solutions. The deal included $16.8 million in cash, which was funded by previously-announced PIPE infusion from Pequot Ventures and Constellation Ventures. Vector ESP had raised over $50 million in VC funding since its 2000 inception, from firms like Centennial Ventures, GCI and Nassau Capital. www.vector.com
Knoll Inc., an East Greenville, Pa.-based provider of branded office furniture products and textiles, has priced over 11.04 million common shares at $15 per share (middle of its $14-$16 range), for an IPO take of approximately $165 million. The company will trade on the NYSE under ticker symbol KNL. The company is majority-owned by Warburg Pincus Ventures. www.knoll.com Blue Linx Holdings Inc., n Atlanta-based distributor of building products, has priced 9.5 million common shares at $13.50 per share (below its $15-$17 range), for a total IPO take of approximately $128.25 million. It will trade on the NYSE under ticker symbol BXC. The company was launched in 1954 as a division of Georgia-Pacific Corp. (NYSE: GP), but was acquired this past May by Cerberus Capital Management and members of company management. www.bluelinxco.com Conor Medsystems Inc., a Menlo Park, Calif.-based developer of vascular drug delivery technologies, has priced six million common shares at $13 per share (top of $11-$13 range), for a total IPO take of approximately $78 million. It will trade on the Nasdaq under ticker symbol CNR. The company has raised around $80 million in total VC funding since its 1999 inception, with significant shareholders including Highland Capital Partners, Hunt Capital Partners, Maverick Fund and Hambrecht & Quist London Ventures. www.conormed.com ArmorGroup International PLC, a UK-based provider of protective security services and security training services, has priced an IPO on the London Stock Exchange. Gross proceeds are GBP 30.7 million. Granville Baird Capital Partners sponsored a management buyout of ArmorGroup in 2003. www.armorgroup.com
AIG Global Investment Group has closed its third fund program with over $238.91 million in limited partner commitments. Named PEP III, the program consists of a domestic buyout fund, a non-U.S. buyout fund, a venture capital fund, a secondary fund and a direct investment fund. The previous PEP program was closed in mid-2002 at $135 million. www.aig.com
O'Melveny & Myers LLP will add 16 new partners on February 1, 2005. Included will be: Jim Moriarty, who represents private equity funds, VC funds and their portfolio companies; Russell Pinilis, a tax attorney specializing in private equity transactions and fund formation; and Steve Sonne, who works with emerging growth and public technology companies on both private and public financing transactions. www.omm.com Hungarian Telephone and Cable Corp. (AMEX:HTC) has elected three new members to its board of directors: Jesper Helmuth Larsen, Robert Barnes and Michael Fortier. Larsen is CHO of TDC AS' Nordic broadband and fixed-line division; Barnes is a partner with Alchemy Partners and Fortier is a consultant whose principal client is Slavia Capital. Peter Collins, a principal and senior managing director of Atlantic American Equity Partners, has been named an independent director on the board of Digital Lightwave Inc. (Nasdaq: DIGL). Jason Oelrich has been promoted to president and managing director of Liberty Financial Group. Prior to joining Liberty as its CFO, Oelrich founded Virtual CFO Solutions and, before that, served as a partner with VC firm MW Capital. www.lfgloan.com **************** Correction: Dan Blanks, who is retiring from Hicks, Muse, Tate & Furst, was not a founding partner of the firm. He joined the firm as a seior vice president in 1996, and was named partner in 1997.
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December 14, 2004 
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