THE SENATE                           S.R. NO.              184
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  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

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

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