Indiana pension fund ‘monitoring’ Silicon Valley Bank developments

The Indiana pension system is keeping a close eye on its investment in a debt fund managed by SVB Capital, a venture capital firm that is a subsidiary of Silicon Valley Bank’s parent company but is separate from the tech-focused bank that was shut down by regulators and seized by the federal government.

The Indiana Public Retirement System, or INPRS, in July committed $150 million to the SVB Innovation Credit Growth Fund, a private debt fund focused on lending to mid- to late-stage-growth businesses. The fund is managed by SVB Capital, the venture capital arm of SVB Financial Group.

Of that $150 million, INPRS has invested $39.6 million in the fund to date, an INPRS spokesperson said.

“INPRS is actively monitoring the situation with Silicon Valley Bank,” INPRS spokesperson Dimitri Kyser told IBJ. “The Fund and Silicon Valley Bank Capital operate as separate legal entities, distinct from Silicon Valley Bank. INPRS’s commitment and current investment are owned by the fund, and as such, are not subject to the resolution process underway for Silicon Valley Bank.”

SVB Financial Group filed for Chapter 11 bankruptcy protection Friday, a week after the collapse of Silicon Valley Bank brought back memories of the financial crisis that led to the Great Recession in 2008.

William Kosturos, chief restructuring officer for SVB Financial Group, said the Chapter 11 process will allow the company “to preserve value as it evaluates strategic alternatives for its prized businesses and assets,” adding that the company believes it has about $2.2 billion of liquidity, the Associated Press reported.

Another company could purchase SVB Capital and take over management of INPRS’ investment, said Sarah Jane Hughes, an expert on finance and banking law at the Indiana University Maurer School of Law.

SVB Capital has made investments in big-name venture capital firms like Sequoia Capital and Andreesen Horowitz, Hughes said, which have not been affected by SVB’s shutdown.

Hughes doesn’t believe INPRS members have reason to panic.

“SVB Capital invested at least some of its money in these very well-known big funds,” Hughes said. “I don’t think there’s any reason to (think) that those other big firms are in trouble.”

Following Silicon Valley Bank’s collapse last week, the Federal Deposit Insurance Corp. agreed to protect insured depositors that had more than $250,000 in the bank, which is normally the maximum amount covered by the FDIC. More than 90% of SVB’s deposits exceeded the $250,000 cap.

But the FDIC does not insure money invested in stocks, bonds and other funds, even if they were bought from an insured bank. Ohio’s public employee pension funds appears to have lost more than $30 million in the Silicon Valley Bank collapse, and the Illinois Municipal Retirement Fund may have taken an $8.6 million hit from the failure.

INPRS did not have any investments in Signature Bank, which also shut down after depositors made a run on the bank. New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the FDIC said late Sunday.

Critics of the Biden Administration’s decision to guarantee the deposits have characterized it as another bailout for the rich, comparing it to the 2008 financial collapse when the government rescued banks, shareholders and auto makers. The nation’s top economics officials contend the measure was necessary to boost confidence in the markets and discourage investors from pulling their money from other financial institutions.

Some federal lawmakers are calling for a repeal of 2018 legislation that rolled back stringent regulations on mid-size banks. Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., introduced legislation Tuesday to restore a piece of the Dodd-Frank Act that subjected mid-size banks like SVB to stress tests and enhanced capital requirements.

The collapse of SVB led to investor worries over Credit Suisse, which also had a high number of uninsured deposits. That prompted the Swiss National Bank to offer the troubled bank a $50 billion loan to ease those concerns.