Sapphire Partners Assumes Management of $1.4 Billion in Funds for CalSTRS

Sapphire Partners Assumes Management of $1.4 Billion in Funds for CalSTRS

A New Chapter for CalSTRS

In a significant move for the venture capital world, Sapphire Partners, the LP division of venture capital firm Sapphire Ventures, has assumed management of five funds on behalf of the California State Teachers’ Retirement System (CalSTRS). These funds, which are valued at $1.4 billion, are primarily focused on emerging managers. This decision followed Invesco’s exit from this line of business, leading CalSTRS to reconsider its approach towards supporting emerging managers. The new partnership between Sapphire and CalSTRS cements Sapphire’s position as one of the leading supporters of the emerging manager system in the venture world.

Sapphire’s Expanded Role

With this change, Sapphire Partners is now solely responsible for CalSTRS’s investments in emerging managers. This is a significant shift, as CalSTRS is one of the largest pension funds in the United States, boasting $320 billion in assets under management. The majority of the $1.4 billion in funds that Sapphire will now manage has already been committed. However, Sapphire does plan to invest an additional $100 million per year over the next three to four years. This move increases Sapphire’s assets under management to a staggering $3.6 billion.

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CalSTRS’s Investment Philosophy

CalSTRS has long been a believer in the power of emerging managers, particularly in the technology sector. This partnership with Sapphire is a testament to that belief. The decision to standardize one group to focus on venture investments, according to Rob Ross, a private equity portfolio manager at CalSTRS, “made a lot of sense” due to the specialized nature of emerging manager investments.

Impact on Emerging Managers

Emerging managers are a critical part of the venture capital ecosystem, bringing fresh perspectives and innovative approaches to investing. With Sapphire’s new partnership with CalSTRS, aspiring and newbie venture capitalists should be aware of the opportunities this presents. Sapphire has long backed emerging managers and this development only strengthens their commitment. The partnership will allow Sapphire to continue to invest in promising fund managers in the U.S., Europe, and Israel.

Embracing Diversity and Innovation

The Sapphire Partners portfolio already features nearly 70 managers from diverse backgrounds. This diversity extends not only to gender, race, and ethnicity but also to thought and innovation. By investing in emerging managers, Sapphire and CalSTRS are not only supporting a diverse range of individuals but are also enabling a broader scope of ideas and investment strategies.

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Looking Ahead

While the fundraising environment in 2023 and likely into 2024 is materially different than previous years, due to a predicted six-year low in US venture capital fundraising, there are still many positives. The expansive depth and breadth of the tech and venture ecosystems, an enlarged LP base, and more options for how managers can get started are all reasons for optimism. The partnership between Sapphire and CalSTRS is a significant step towards fostering a supportive ecosystem for emerging managers, setting the stage for the next wave of innovation and growth in the venture world.