New Mexico Private Equity Investment Program Q Review

Transcription

1 New Mexico Private Equity Investment Program Q Review February, 2017

2 NMPEIP Q Update Summary Program is in compliance with the statute $265.6 million in net deployed capital versus a statutory cap of $ million Individual company ownership concentration levels are below statutory caps Program s net deployed capital represents 5.7% 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 Internal Rate of Return Fund Group 1 yr 3 yr 5 yr Inception NMPEIP Aggregate 5.1% 8.3% 9.4% 0.9% 2004 to Present 6.9% 10.9% 10.9% 5.9% Prior to % -10.6% 1.6% -6.3% 2

3 NMPEIP Financial Performance Improvement vs Present Metric Present Difference Internal Rate of Return -18.2% 5.9% +24.1% Since Inception Returns $-56.5M $66.9M $123.4M Distributions to the SIC $5.0M $146.9M $141.9M Non-Program Investment Into NM-based Companies Source: Invient $0.5B $1.5B +180% Program focused on economic development Program focused on financial returns Advisor - Sun Mountain Capital 3

4 Since 2004, NMPEIP Vintages Tracking National Benchmark Returns Since 2004, performance has tracked a national venture capital benchmark 63% of vintages are above median 2004-Present Vintage 1 st quartile: 50% 2 nd quartile: 13% 3 rd quartile: 37% 4 th quartile: 0% From , only 14% of vintages are above median Vintage 1 st quartile: 0% 2 nd quartile: 14% 3 rd quartile: 29% 4 th quartile: 57% NMPEIP v. National Benchmark NMPEIP Preqin Vintage Net IRR Quartile % Second 1994 N/A N/A (0.9%) Fourth 1997 N/A (20.6%) Fourth 1999 N/A (11.8%) Fourth % Third 2002 (3.1%) Third 2003 (21.0%) Fourth 2004 (4.0%) Third 2005 (2.4%) Third % First % Third % Second 2009 N/A N/A N/A N/A * 1.60x First 2014* 1.43x 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 09/30/2016) and Preqin Database custom benchmarking (as of 09/30/2016) 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 Pavilion Capital and State Investment Office staff ** There are not a significant number of 2016 Funds to create a benchmark 4

5 Summary of Program Economic Impact in Q NMPEIP Impact Summary as of 9/30/16 Total Investment in New Mexico Portfolio Companies A) Investment by Funds with NMPEIP Participation $326,848,469 B) External Investment Caused by Funds with NMPEIP Participation $1,995,123,933 Total VC Investment in NM Companies $2,321,972,402 Investment Multiplier (B / A) 6.1x Categorization of NM Portfolio Companies Active Companies % Companies Exited at a Gain % Companies Exited at a Loss % Number of Companies funded % NM Economic Impact Q NM Purchases $26,783,591 NM Payroll $28,983,556 NM Economic Impact $55,767,147 Total Current Full-Time Jobs 1,527 Average Salary of Jobs Created $75,923 Average Salary in New Mexico 1 $43,170 Source: Survey of participating NMPEIP fund managers and NM companies for active companies and most recent verified data for exited companies 1 Source: New Mexico wage and salary disbursements and total wage and salary employees from the U.S. Dept. of Commerce, Bureau of Economic Analysis 5

6 73 New Mexico Companies New Mexico Companies as of 9/30/16 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 (32) Exited at a Gain (15) Exited at a Loss (26) 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 6

7 Capital Invested by Sector: Active NMPEIP Program Sector Concentration 7

8 Summary of Key Points Program is currently tracking to the long-term pacing plan approved by the SIC The change in the statute has resulted in an increased number of quality funds in the Program s investment pipeline Currently 3 funds are in advanced stages of due diligence for potential commitment from the NMPEIP Program financial returns are improving steadily from the 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 8

9 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 , 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 9

10 NMPEIP Status Overview and Summary of Partnership Commitments Unaudited Performance Data as of 9/30/16 Number of Fund Commitments 33 Capital Committed (Total) $454.1 Capital Committed (Net of Dist.'s Received) $302.1 Capital Drawn $417.5 % of Capital Committed (Total) 92.0% Distributions Received $151.9 % of Capital Drawn 36.4% Outstanding Deployed Capital $265.6 Outstanding Deployed Capital as % of STPF 5.7% Portfolio Carrying Value $292.8 Total Portfolio Value $444.7 % of Capital Drawn 106.5% Portfolio Multiple of Invested Capital 1.07x Portfolio IRR 0.9% Note: Returns calculated using reported Carrying Values as of 9/30/16 and data provided by Invient Severance Tax Permanent Fund ('STPF') currently $4,637.7 million as of 9/30/16 All Fund Commitment Summary Commitment Funded Percent NM Investment Value ($) 2 Return 2 Fund as of 9/30/16 Vintage Dollars To Date Funded Invest 1 Realized Unrealized 3 Total Multiple IRR Liquidated ARCH Venture Fund II, L.P $1.2 $ % $67.1 $4.3 $0.0 $ x 44.8% Yes ARCH Venture Fund III, L.P $4.0 $ % $0.0 $3.7 $0.0 $ x -0.9% In Process CVM Equity Fund V 1998 $3.0 $ % $1.1 $1.7 $0.0 $ x -6.1% Yes Murphree Venture Partners IV, L.P $4.0 $ % $4.9 $0.1 $0.0 $ x -71.8% Yes Tullis/Dickerson Capital Focus II, L.P $5.0 $ % $10.1 $2.5 $1.5 $ x -1.7% Yes Valley Ventures II, L.P $3.0 $ % $18.4 $2.6 $0.0 $ x -1.6% Yes Vestor Partners, L.P $2.5 $ % $0.0 $0.6 $0.0 $ x -16.4% Yes International Venture Fund I, L.P $5.0 $ % $9.6 $0.9 $0.1 $ x -12.3% Yes Murphree Venture Partners V, L.P $3.0 $ % $2.2 $1.0 $0.2 $ x -10.7% In Process Red River Ventures, L.P $7.2 $ % $12.8 $3.9 $0.3 $ x -11.9% Tullis/Dickerson Capital Focus III, L.P $15.0 $ % $23.7 $13.9 $4.9 $ x 4.8% Wasatch Venture Fund III, LLC 2001 $8.7 $ % $41.6 $4.6 $2.6 $ x -2.5% Altira Technology Fund IV, L.P $10.0 $ % $14.3 $14.1 $0.0 $ x 6.1% Blue Sage Capital, L.P $10.0 $ % $10.0 $26.0 $3.0 $ x 21.7% ITU Ventures West I, L.P $15.0 $ % $15.3 $6.0 $0.0 $ x -15.5% Yes Valley Ventures III, L.P $6.7 $ % $14.9 $1.5 $0.1 $ x -18.3% New Mexico Co-Investment Partners, L.P $62.0 $ % $163.7 $13.3 $0.0 $ x -23.4% Yes vspring II, L.P $20.0 $ % $91.9 $0.0 $4.3 $ x -13.8% Flywheel I, L.P $15.0 $ % $52.8 $9.7 $6.1 $ x 0.7% Verge I, L.P $10.0 $ % $50.6 $7.3 $2.0 $ x -1.1% Wasatch New Mexico Fund, LLC 2004 $12.0 $ % $47.0 $1.4 $2.8 $ x -12.2% ITU Ventures III NM, L.P $2.3 $ % $0.0 $0.1 $0.0 $ x -73.6% Yes Psilos Group Partners IIIB, L.P $15.0 $ % $28.8 $8.0 $12.1 $ x 5.3% Village Ventures Fund II-B, L.P $15.0 $ % $3.2 $14.4 $16.3 $ x 10.6% NMSIC Co-Investment Fund, L.P. (Classic) 2007 $30.0 $ % $364.3 $7.1 $19.4 $ x -2.7% NMSIC Co-Investment Fund, L.P. (Focused) 2007 $62.5 $ % $848.2 $1.9 $115.7 $ x 9.5% vspring III, L.P $15.0 $ % $13.2 $0.5 $13.2 $ x -1.3% EPIC Venture Fund IV, LLC 2008 $10.0 $ % $10.0 $0.3 $16.9 $ x 12.3% NMSIC Co-Investment Fund, L.P. (2013) 2013 $20.0 $ % $53.7 $0.2 $28.1 $ x 21.4% NMSIC Co-Investment Fund, L.P. (2014) 2014 $40.0 $ % $49.5 $0.2 $39.2 $ x 43.3% EPIC Venture Fund V, LLC $10.0 $ % $0.0 $0.0 $0.0 $0.0 N/M N/M Psilos Group Partners III Subsidiary, L.P $2.0 $ % $0.0 $0.0 $3.0 $ x 305.3% Phoenix Venture Partners II, L.P $10.0 $ % $0.0 $0.0 $0.9 $ x -52.8% Program Totals $454.1 $ % $2,023.0 $151.9 $292.8 $ x 0.9% 10 of 33 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 9/30/16 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 10

11 NMPEIP Carrying Value Quarter Over Quarter NM PEIP Changes in Q Reported Value Early VC Later VC Buyout Total Reported Valuation as of Q $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 Q $158.8 $105.9 $3.5 $268.1 Source: Invient reporting NM PEIP Changes in Q Reported Value Early VC Later VC Buyout Total Reported Valuation as of Q $158.8 $105.9 $3.5 $268.1 Contributions to General Partners $4.0 $0.0 $0.1 $4.1 Distributions from General Partners $4.7 $0.0 $0.3 $4.9 Change in Value ($5.7) $21.9 ($0.5) $15.7 Reported Valuation as of Q $161.7 $127.8 $3.3 $292.8 Source: Invient reporting 11

12 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 such information being complete and accurate in all material respects. Additionally, analysis may utilize or involve forward-looking information 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 may differ materially from actual results or change significantly if any one or more of the assumptions are changed. As such, undue reliance should not be placed on such information. Economic development data including employment, payroll and dollars spent in the State of New Mexico is collected quarterly for both active companies in the NMPEIP as well as those in which portfolio funds no longer have an active interest. For active companies, 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 reliable of 1) last reported data, 2) direct outreach to companies to collect data or 3) independently verified data provided by third party entities. Annually, Sun Mountain Capital Advisors reviews fund manager data submissions by directly contacting a sampling of underlying 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 from Sun Mountain Capital Advisors or the New Mexico State Investment Council. 12