Blazing the Oregon trail

In an effort to spur investment in its home state, the Oregon Investment Fund has recently backed three private equity and venture capital funds—as long as they set up shop in the Beaver State. By Paul Fruchbom.

In recent years, the state of Oregon, once known primarily for the namesake trail that guided American settlers westward, has burnished its cultural reputation. A vibrant music scene has emerged in Portland, the state’s largest city, and Oregon’s microbreweries and wineries have become some of the most highly regarded in the country. Now, the Oregon Public Employees Retirement Fund is hoping to take that momentum and turn the Beaver State into a hotbed of private equity activity.

Yesterday, the Oregon Investment Council, which oversees the state pension fund’s $56 billion (€44 billion) in assets, approved investments in three venture capital and private equity funds. The three recipients include: Wedbush Capital Partners, a lower middle market private equity firm based in Los Angeles; Burrill Life Sciences Fund III, an early-stage life sciences venture capital vehicle managed by San Francisco-based Burrill & Company; and Voyager Capital Fund III, a fund focused on emerging technology companies in the Pacific Northeast and Northern California overseen by Seattle-based venture capital firm Voyager Capital.

Of course, the equity commitments come with a catch. Not only do the firms need to spend “a significant amount of time looking at investments in Oregon,” they also need to move there. As part of the investment program, those firms that are based outside of Oregon have agreed to set up a local office. Fortunately, at least for Wedbush, it already has four offices there.

The three investments come through the Oregon Investment Fund, a $105 million state-sponsored vehicle established in 2004 to foster small businesses in the region via private equity investments. With the announcement yesterday, the fund, which is managed by Credit Suisse, has committed half of its capital. In a statement, Oregon State Treasurer Randall Edwards noted that other such equity commitments may be announced in the near future.

Edwards: more to come

OPERF has long been a leading investor in the private equity industry—it has been a major KKR investor for decades and the pension fund currently has approximately $5 billion dedicated to the asset class. The move by Oregon to promote local private equity activity mirrors similar developments across the country, including state pension funds in California, Ohio and Massachusetts. Though proponents point out that such vehicles foster local job creation and entrepreneurial activities, critics contend that they are politically motivated tools that misallocate state resources and inefficiently access the private equity sector.

But it would be a mistake to dismiss Oregon’s potential as a hub for business. Global powerhouse Nike, for example, has its headquarters in Beaverton, Oregon. And earlier this week, the New York Times reported that Google, no stranger to venture capital funding, is building a sprawling computer centre, one of the largest in the world, 80 miles east of Portland on the banks of the Columbia River.