PDF: 2962 pages, 5.2 MB - Bay Area Council Economic Institute

Global Reach
timeframe. By mid-2007, it had a total investment of more than $1 billion in 55 Indian stocks, up
more than 260% from their $277 million value when the shares were purchased.
As described earlier in this report (see the Architecture/Urban Planning/Infrastructure section in Chapter 6),
CalPERS has also invested in Indian real estate, contributing $100 million to IL&FS Investment
Managers’ India Realty Fund and $50 million to Sun Apollo Ventures’ India Real Estate Fund.
In 2007, CalPERS reallocated its India equity holdings, investing $75 million in 100 additional
companies—divided mainly among the petroleum, IT, logistics, financial and infrastructure
sectors—as part of a strategy to focus on stocks outside the U.S., including in emerging markets.
At the same time it changed its overall portfolio allocation away from stocks as an asset class.
Among its top 2008 holdings were Chennai Petroleum Corp., Satyam Computer Services, Wipro,
ABB (India), Indraprastha Gas, Axis Bank, and Cairn India.
The Franklin Templeton Group of Funds, in San Mateo, has some $6 billion locally
invested in India through its own India mutual fund, according to chief investment officer
Stephen Dover, and it has an equivalent amount invested with other India funds.
Franklin Templeton began investing in emerging markets, including India, in 1982, but most of
the serious growth has taken place in the past four years.
“There’s an enormous amount of potential in India,” says Dover, who travels there four times a
year. “India is early in the takeoff stage, behind China and Southeast Asia. But unlike China, India
is really a domestic consumption story; it’s not that dependent on export growth.” The key, he
adds, is passing the per capita GDP threshold of $1,000 annually, which will translate into discretionary
consumption on a massive scale, given India’s high savings rate. He points to India’s large
talent pool of scientists, technicians, and managers, and the more than 5,000 listed companies that
have relatively strong corporate governance, healthy earnings, and a focus on return on equity.
“There was not much FDI before,” he notes, “so they had to manage their cash well.”
Dover sees long-term potential in the diversification and globalization of publicly-owned Indian
companies, which to date have paid out high premiums to private equity investors. But he also
expects FDI to account for a smaller share of growth going forward. “We’ve gone from having
Americans invest overseas to having Indian companies managed by Indians in India raising
money from Indian investors.”
To support its operations, Franklin Templeton has worked with Indian IT partners since 1998,
and it established a captive center of its own in 2003.
Gen. William Draper, became the first professional venture capitalist on the West Coast
in 1958, after heading the team in charge of implementing post-war economic reconstruction
of Germany and Japan under the Marshall Plan. His son, Bill Draper, formed
Draper & Johnson Investment Co. in 1962 and then Sutter Hill Ventures in 1965. The younger
Draper later went on to head the U.S. Export-Import bank in 1981 and the United Nations
Development Program in 1986. Looking to apply his global experience to venture investing, he
teamed with Robin Richards Donohoe, a Stanford Business School graduate knowledgeable in
emerging markets financing, to form the first India VC fund, Draper International.
228