The New Mexico State Investment Council’s private equity investment advisory committee voted recently to approve a private equity allocation target for 2011 of at most $275 million at most, to be divided among six managers. However, the limited partner is still hesitant about the asset class and is in no hurry to make pledges, said a spokesperson.
The $275 million, an amount recommended by consultant NEPC but not yet approved by the full council, is a target that will help maintain the state investment council’s current allocation to private equity of 10 percent of $13.8 billion assets, said spokesman Charles Wollmann.
“The last couple quarters, the inflows have been almost matching the outflows, which is always good news,” said Wollmann. The state’s normal commitment pace is $300 million, although for a couple of years it was as high as $350 million.
However, there are “some concerns about whether we can get to $275 and do it well,” said Wollmann. “We’ve always had a very robust PE program,” but placement agents “inserted problems in the system, and we’re still dealing with that, so there is still a hesitancy with some of the members of the council about controlling things and making sure it doesn’t happen ever again. So there’s a tentative feeling. They want to make sure they have a good grasp of these types of investments, such as private equity, real estate and hedge funds,” he said.
The state had used Aldus Equity as its private equity consultant until the firm imploded due to its involvement in a pay-to-play scandal last year.
A couple of re-ups to existing managers are in the offing, but will not likely be voted on until February. “The attractiveness of distressed funds has been discussed at length,” said Wollmann. “And mezzanine funds are interesting because you get your money back quicker.” Historically the LP has not invested in emerging markets, but New Mexico State Investment Council “will be looking at that,” he said.