New Mexico Picks Adviser In Wake Of Scandal

New Mexico’s scandal-stricken $15 billion retirement system has appointed a new adviser to help manage the state’s $1.3 billion private equity portfolio.

The new adviser, StepStone Group, which is based in La Jolla, Calif., formally replaces Dallas-based Aldus Equity Partners, whose contract was annulled in 2009. The state’s general investment adviser, NEPC, has managed the private equity portfolio since Aldus’s contract ended.

Charles Wollmann, a spokesman for the New Mexico State Investment Council, said StepStone was chosen from among several candidates after a thorough decision process. He said the council felt that StepStone was a good fit for the state’s needs.

New Mexico, whose retirement investments returned 14 percent in 2010, has 10 percent of its portfolio in private equity. The state’s private equity target allocation is a range of 6 and 12 percent.

Aldus, the previous adviser, is being sued in New York State for paying an alleged $5 million kickback as part of an effort to gain a role in managing assets of the New York State Common Retirement Fund.

In New Mexico, federal investigators are looking into pension investments made under a previous New Mexico governor, Bill Richardson, who was alleged to have steered pension money to investment advisers with whom he had close political ties. Aldus was among the firms named in the scandal. No charges have been announced so far in New Mexico.

Legislators in New Mexico are quickly moving to change state laws to try to remove politics from decisions made by the council, which is unusual among retirement systems in that it appoints the governor to be the chairman of the council’s board.

The current governor, Susana Martinez, said she agrees with most of the proposed rule changes, and said that neither she nor any other politician should be managing the state’s investments.

Separately, New Mexico has committed $50 million to an energy-focused private equity fund, the EIG Energy Fund XV, which has a goal of raising $2.5 billion. The EIG investment was advised by NEPC. EIG was recently spun off from Washington, D.C.-based TCW Group, a unit of Société Générale.