A Detroit Free Press news report said the commitment by the $57-billion state pension fund represents a shift because officials have previously only devoted a small amount of money to boosting Michigan firms.
Granholm hoped the Invest Michigan! Program will deal with the traditional difficulties companies have had in finding enough working capital to grow their workforce. The program involves setting up two professionally managed $150-million funds that will invest in a variety of companies over the next two to three years.
The idea is controversial because many say that the private sector should make investment decisions. “Governments are the least market-savvy,” David Littmann, senior economist at the Mackinac Center for Public Policy and Comerica Bank’s former chief economist, told the Free Press.
The first fund, called the Growth Capital Fund, will make investments of $2 million to $7 million in attractive companies. It also plans to make larger investments alongside some private equity firms. The fund is to be managed by Beringea, a Farmington Hills-based private equity and investment banking firm, and the New York investment bank Credit Suisse.
The Michigan Opportunities Fund will do recapitalizations, buyouts, and growth equity investments in established lower middle-market Michigan companies. It is to be run by Chicago-based Glencoe Capital, a private equity firm that plans to open an office in Birmingham with four to six employees. The fund expects to make about 10 investments, ranging from $25 million to $125 million each, according to the news account.
The fund managers will work with a newly formed Business Leadership Council to identify investment opportunities. The 18-member council will be chaired by Detroit businessman Roger Penske, chairman and CEO of the Penske Corp.
Granholm first announced her investment plan in a January state of the state address (See MI’s Granholm Calls for Pension Funds to be Invested in Start-Ups ).