Georgia Candidate Wants Pension Funds to Invest In Start-Ups

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Jason Carter, Georgia’s Democratic candidate for governor, released his economic plan this month, and in it there’s an idea of particular interest to pensions: Carter wants to make it easier for the Teachers Retirement System of Georgia to invest in Georgia-based start-ups.

From the Atlanta Journal-Constitution:

The Democrat argues in his economic pivot  that he wants teacher pensions to be able to pump funds into local startups “so long as we’re making sure that we can manage the risk in ways that make sense.” He sees it as a way to boost a state-backed effort to invest in venture capital firms that, as you’ll see in today’s AJC, has lagged.

“The things that concern the teachers is to make sure you’re stewarding the pension appropriately. So it’s crucial to make sure that we are managing the risk in ways that works,” he said. “But we shouldn’t have those pension funds losing out on higher growths and higher returns just because of artificial caps on what it can do.”

Georgia lawmakers cleared the way for pension funds to invest up to 5 percent of their assets in alternative investments, such as venture capital firms, that had at least $100 million on the books. But the law excluded the Teachers Retirement System of Georgia, the state’s largest public pension with nearly $59 billion in assets.

North Carolina and other nearby states allow their teachers’ fund to invest in startups, but Gov. Nathan Deal and other Republicans have raised red flags. Lawmakers signaled they were reluctant to include the teachers fund in the 2012 legislation because the group’s board hadn’t approved the changes.

Critics are wary of the risk attached to investing in unproven companies. Other critics say it would open the door for cronyism and make pension investments increasingly political.

A 2012 state law enabled most Georgia pension funds to invest in alternatives for the first time. But the law prohibits alternatives from making up more than 5 percent of total assets.

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