CHEYENNE -- Wyoming's five elected officials voted Monday to add $600 million to the state's investment in private equities in the next three to five years.
The State Loan and Investment Board, which includes Gov. Matt Mead, boosted Wyoming's investments that aren't traded on the stock markets to 5 percent of the state's portfolio of permanent funds that can be invested in equities -- $10 billion to $11 billion. The state has more than $16 billion in its total portfolio.
The board accepted a recommendation from state Treasurer Mark Gordon to hire firms Hamilton Lane of Philadelphia and Neuberger Berman of Dallas to manage $200 million in private equities each.
The two companies were chosen from among 19 managers who originally responded to the state's request for proposal. The state's financial advisers, R. V. Kuhns and Associates, recommended hiring the two firms.
The state has been reviewing private-equity proposals from investment firms for the past two years. Gordon took office last fall after the death of longtime Treasurer Joe Meyer.
The board agreed with Mead's suggestion to put another $200 million for private-equity investment above the $400 million required to hire the two firms. Gordon's office will work with R.V. Kuhns and Associates to pick another firm to handle the additional money.
Bob Grady, a principal in Cheyenne Capital Fund, said after the meeting that his firm plans to bid to manage the remaining $200 million.
Cheyenne Capital, with offices in Jackson and Denver, was the first private-equity company hired by the state 10 years ago. It currently has a commitment for $250 million in investments.
Access Venture of Denver currently has a $10 million commitment.
Cheyenne Capital wasn't considered for the new funds because it couldn't meet the $2 billion in assets under management, which was a minimum requirement, the company directors said earlier.
Cheyenne Capital has invested nearly $350 million for the state since 2003. Grady said the firm's returns to the state have outperformed the S&P 500, the largest companies on the stock market, by more than 8 percent a year.
Grady said Cheyenne Capital has produced returns of 13 percent compared to a 12 percent average for remaining states.
"So we've done our job. We've outperformed the market," he said.
Cheyenne Capital will stop making new investments for the state this year, and Grady said it will likely take years for the firm to wrap up the investments it already has made.
The diversification of the state's private-equity holding was first proposed two years ago by Meyer, who died in October.
Mead recalled Monday that Meyer told the board to proceed with caution with diversification in this investment class. As a result, the board members took time "to get up to speed," Mead said.
Mead noted that other states invest 8 percent of their permanent funds in private equities.
State Superintendent of Public Instruction Cindy Hill said a financial adviser told the board earlier that it wasn't a good time to be investing in private equities.
Michael Walden-Newman, the chief investment officer for the state treasurer's office, said that statement was made a year ago. He added that unlike fixed-income investments, private-equity money is invested over many years.
When asked how the state’s current investment in private equities is doing, Walden-Newman said, "We're doing terrific."
He said Cheyenne Capital made $91 million in profits.
Access Venture, he added, is a younger fund with $30 million in assets.
The state's current private-equity investment of $260 million is from the Permanent Mineral Trust Fund and the permanent land funds.
Gordon's motion allows the additional money to be invested from other funds as well, including the Hathaway Scholarship Fund, the Excellence in Higher Education Endowment Fund and the Workers' Compensation Fund.