New York State Comptroller Tom DiNapoli said he’s looking for more startup companies and entrepreneurs to invest in, as part of a partnership between the state’s pension fund and private equity managers.
DiNapoli has $400 million that he’s looking to invest in New York-based startup companies. The money is part of a more than one billion dollar fund that uses the state pension plan monies to invest in locally-based entrepreneurs who want to grow their business in the state. The comptroller’s office works in partnership with 18 private equity managers, who decide whether the companies are a good investment and a reasonable risk for the pension fund.
DiNapoli said $684 million has already been invested in 252 New York-based companies, ranging from high-tech and software and medical instruments to a company that builds swimming pools and an embroidery design business.
“What we require is something very simple, and that’s a commitment to New York State,” DiNapoli said. He added that he also keeps an eye on the bottom line for the pension fund profits.
The comptroller says about 4,000 new jobs have been created. Nearly $300 million has been returned to the pension fund, as the private equity managers eventually sell their stake in the companies. DiNapoli said so far, the return rate has been 20 percent. The average long-term rate of return for the entire pension fund is around 7.5 percent.
Mark Cattini is CEO of Autotask, based outside Albany, which provides IT services to small companies. His company is a recipient of the pension fund private equity investment, and he said it enabled him to increase his workforce to 160 people in upstate New York.
“Entrepreneurs have visions, they have dreams, they have ideas,” Cattini said. “But without funding it’s very, very hard to move that forward.”
Other states have offered similar private equity investment plans, using pension fund monies, but have not been successful. The pension fund for the State of California, for instance, is trying to end its private equity investment program because of poor results.
DiNapoli said New York has learned from the mistakes of other states and is more careful in choosing its investments.
And he said the private equity managers and the pension fund are looking for new investments.
“We want to get the word out, ” DiNapoli said. He added that for some companies, it’s a more viable option than traditional funding, which can be hard to come by in the slow economy.
DiNapoli is traveling the state to try to reach more potential entrepreneurs.