THE SENATE                           S.C.R. NO.            90
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  CONCURRENT
                        RESOLUTION

  ENCOURAGING THE EMPLOYEES' RETIREMENT SYSTEM TO INVEST TEN
    PERCENT OF ALTERNATIVE ASSET ALLOCATIONS IN VENTURE
    CAPITAL FUNDS FOR HAWAII TECHNOLOGY COMPANIES.


 1        WHEREAS, venture capital is defined as an investment in
 2   non-public growth companies that is expected to greatly
 3   increase the value of the company, and therefore, the
 4   investment; and
 5   
 6        WHEREAS, venture capital is critical to nurturing and
 7   encouraging growth of technology-based firms in a hyper-
 8   competitive global market; and
 9   
10        WHEREAS, in 1999, technology-based companies, including
11   Internet-related businesses, accounted for more than ninety
12   percent of all investments; and
13   
14        WHEREAS, according to a 1999 Price Waterhouse Coopers
15   Money Tree Survey Report on Venture Capital, venture capital
16   investments reached a new high of $35.6 billion in 1999, and
17   the number of companies receiving funding rose by forty one
18   percent, while the average dollar amount invested per deal rose
19   to $8.9 million; and
20   
21        WHEREAS, in the fourth quarter of 1999, only $397,000 in
22   venture capital investments were reported in Hawaii, with
23   Hawaii ranked as one of the lowest of the states identified;
24   and
25   
26        WHEREAS, the most economically successful states also have
27   the highest venture capital investments; and
28   
29        WHEREAS, other states have found innovative ways to invest
30   employee retirement system or pension funds to encourage growth
31   of the high technology industry and build their economy,
32   including New York, California, and Alaska; and
33   
34        WHEREAS, Hawaii's lack of venture capital is a serious
35   impediment to the future growth of Hawaii's technology industry
36   and measures must be taken to build a stronger venture capital
37   community in Hawaii; and

 
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 1   
 2        WHEREAS, mainland and overseas funders wish to see a
 3   substantial portion of Hawaii capital invested along with their
 4   own in order to have some local oversight on a "remote"
 5   investment; and
 6   
 7        WHEREAS, based on a study by the High Technology
 8   Development Corporation:
 9   
10        (1)  By the year 2000, the number of technology companies
11             in Hawaii is expected to exceed 700;
12   
13        (2)  Nearly 17,000 Hawaii residents are employed in
14             technology businesses; and
15   
16        (3)  Total revenue from Hawaii technology businesses is
17             projected to be more than $2 billion by the year 2000
18             to encourage small as well as large investments;
19   
20   and
21   
22        WHEREAS, without more Hawaii venture capital, companies
23   will be forced to leave Hawaii at an early stage; and
24   
25        WHEREAS, the Employees' Retirement System (ERS) has an
26   allocation of up to three percent of its asset base in
27   alternative asset categories; and
28   
29        WHEREAS, of the three percent ERS has allocated to the
30   alternative asset class, only half of this or $150 million is
31   allocated to venture capital -- currently none is invested in
32   Hawaii -- and the other $150 million is for forestry; and
33   
34        WHEREAS, the fiduciary duty of the ERS requires
35   investments with the highest return and currently there is no
36   policy for investing in venture capital funds for local high
37   technology companies; and
38   
39        WHEREAS, if ERS makes Hawaii venture capital investments,
40   the perceived risks of investing in Hawaii technology companies
41   would be considered comparable to the perceived risks of
42   investing in mainland technology companies, because ERS

 
 
 
 
 
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 1   investments will encourage others to invest in Hawaii, and
 2   therefore ERS and its trustees should not be subjected to
 3   claims of breach of fiduciary responsibility from ERS
 4   investments in Hawaii high technology companies; and
 5   
 6        WHEREAS, enabling ERS to invest in Hawaii companies will
 7   stimulate economic growth and create new employment
 8   opportunities and continue to build Hawaii's economy; now,
 9   therefore,
10   
11        BE IT RESOLVED by the Senate of the Twentieth Legislature
12   of the State of Hawaii, Regular Session of 2000, the House of
13   Representatives concurring, that the Employees' Retirement
14   System is encouraged to invest in the larger goal of supporting
15   Hawaii's economic future by investing ten percent of
16   alternative asset allocations in venture capital funds for
17   technology companies in Hawaii; and
18   
19        BE IT FURTHER RESOLVED that a certified copy of this
20   Concurrent Resolution be transmitted to the Chairperson of the
21   Board of Trustees of the Employees' Retirement System.
22 
23 
24 
25                         OFFERED BY:  ____________________________