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New Mexico hires consultant to review PE fees, expenses

  • Colmore receives $175,000 a year to track fees, expenses
  • New Mexico PE portfolio valued at $1.9 bln
  • Hire echoes similar initiatives at public pensions

New Mexico State Investment Council will hire Colmore Inc to collect and validate the fees charged by the $24.2 billion sovereign wealth fund’s private equity managers, spokesman Charles Wollmann said in an email.

The council approved the Colmore hire at its March 27 meeting.

New Mexico will pay Colmore $175,000 a year to track and review the fees, expenses and carried interest collected by its private-market fund managers, including the PE firms overseeing its $1.9 billion PE portfolio. Colmore will also collect a $30,000 one-time onboarding fee.

The council’s audit committee felt calculating fees would represent an important part of the council’s compliance program, New Mexico documents show.

A number of public institutions, including California Public Employees’ Retirement System and Los Angeles County Employees Retirement Association, tapped outside consultants or conducted internal reviews to get a better grasp on the costs of their respective PE programs.

In LACERA’s case, Pavilion Alternatives Group found the retirement association’s management fees, partnership expenses and other costs were $37 million higher than previously reported in its annual financial report.

“Private equity costs are potentially incompletely reported by public investment funds. Fees, expenses, and carry are often offset against distributions, and may not be itemized in the reports that GPs provide LPs,” says a recommendation memo prepared by New Mexico Deputy Chief Counsel and Compliance Officer Bruce Brown.

“As a result, LPs may have accurate records of net returns, but have incomplete information about total cost and fees.”

New Mexico held 8 percent of its investment assets in private equity as of Jan. 31, a report in its March 27 meeting materials shows. The portfolio’s delivered a 10-year annualized return of 7.32 percent.