New York City readying plan for alternative co-investments

New York City’s $160 billion pension is eyeing co-investments with emerging managers of alternative assets, according to Deputy Chief Investment Officer Alex Doñe.

Doñe was promoted to deputy CIO of the city’s public pension fund last week. He previously led the retirement system’s private-markets team, which includes its private equity portfolio.

New York City’s pension-investment staff expects to present a co-investment plan to the board later this year, Doñe said at Buyouts’ PartnerConnect Emerging Manager conference in Manhattan on Jan. 24.

Establishing the co-investment platform will require board approval, Doñe told Buyouts after his keynote interview, adding that he’s optimistic that it could be completed by year’s end.

“Where we’re going with the private equity and emerging-manager program specifically is our next strategy to target co-investments with emerging managers,” he said in his remarks.

The platform would include co-investments with PE, real estate and other alternative investment managers, Doñe told Buyouts. The city pension’s investment staff spent a year surveying general partners and limited partners to come up with a set of best practices for a potential co-investment platform, he said.

New York City’s current exposure to co-investments is confined largely to discretionary sidecar vehicles controlled by PE firms, Doñe added. To that end, its co-investment strategy functions largely as a way to limit and reduce investment-management fees.

New York City typically allocates $2 billion to $2.5 billion to new PE funds each year, roughly 15 percent of which goes to emerging managers, Doñe said in his remarks. In 2015, City Comptroller Scott Stringer announced a $500 million expansion of the city’s private equity emerging-manager set.

At the time, New York City defined emerging managers as GPs raising as much as $750 million for their first, second or third institutional funds. The 2015 expansion also included capital for managers who had “graduated,” i.e., grown out of those strict guidelines.

“Within that bucket — as you know, public plans like to have a bucket and define — we are looking for minority- and women-led firms. It’s not a mandate or quota,” Doñe said during the keynote.

New York City’s emphasis on diversity isn’t limited to its emerging-manager program. The pension system also requires each of its investment managers to complete a questionnaire addressing their policies on diversity and inclusion, as well as compensation.

“What are their firmwide policies on diversity? If they don’t have one, why not?” Doñe said. “How do you go about recruiting your investment team and non-investment team?”

“That’s how we began institutionalizing diversity to each of our managers,” he said.

Action Item: For more information about New York City’s pension: comptroller.nyc.gov

Photo of aerial view of downtown Manhattan courtesy ©iStock/franckreporter