Clean energy, health attract venture capital

By Ros Krasny

NEW YORK (Reuters) - Demographic destiny and economic necessity will drive the next big waves of private equity investment, a top investment adviser said on Monday.

Venture capital is likely to veer toward life sciences and alternative energy from its traditional high-tech focus, said Monte Brem, managing director of Pacific Corporate Group LLC. in La Jolla, California.

"With the aging population, the demand for anything health-care related is booming," Brem said at the Reuters Hedge Fund and Private Equity Summit.

About 60 percent of money is headed for the biotechnology sector, about 30 percent for devices and 10 percent for other products, Brem said.

"It's a market that you're selling into that is growing dramatically," he said.

"CLEANTECH" ON A GROWTH SPURT

Meanwhile, Brem said, alternative energy investment was surging as local and regional mandates on emissions are enacted, global warming hits the cover of Time magazine and President George W. Bush declares a need to wean the United States off its "addiction" to imported oil.

So-called "cleantech" investment is growing, and, generally, investors are looking to insulate their holdings from possible fallout if crude oil prices climb to $100 per barrel, he said.

Ethanol, wind and solar power and desalination are just some of the alternative areas in focus, Brem said. "Our view is to try to invest in the whole landscape," he said.

In 2005 the California Public Employees Retirement System threw its weight behind cleantech investing, announcing a plan to put $200 million into the sector.

"CalPERS is really ahead of the curve on that," Brem said.

Hedge funds and private equity firms have jumped onto the cleantech bandwagon in the past year.

In March, venture capital firm Kleiner Perkins of Menlo Park, California, debuted a $100 million fund aimed at backing green technologies, terming that sector possibly "the largest economic opportunity" of the century.

North American venture capitalists sunk $502 million into cleantech in the fourth quarter of 2005, up 60 percent on the year, according to a report by the Cleantech Venture Network, an industry monitor. Cleantech surpassed semiconductors as a venture investment category, the group said.

"We're confident this area is going to grow," Brem said, adding that alternative energy was a rare sector where investors could both well and do good.

"At $50 or $60 or $70 crude oil, a lot of technologies will be feasible that may not have been before," he said.