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New Mexico SIC commits to Hellman & Friedman, moves to improve PE-portfolio monitoring

  • Assets under management: $22.4 bln
  • Target allocation to PE/VC: 12 pct
  • Actual allocation to PE/VC: 10.76 pct
  • Key advisers/consultants: Pavilion Alternatives Group
  • Whom to contact for a meeting: Charles Wollmann (charles.wollmann@state.nm.us)
  • Why this is important: LPs are investing in services to manage their private equity portfolios more effectively.

New Mexico State Investment Council’s board at its Aug. 28 meeting approved a $100 million commitment to Hellman & Friedman’s ninth fund, bringing the year’s private equity commitments to $235 million.

Earlier in the year, New Mexico SIC committed $75 million to JMI Equity’s ninth fund, targeting $1.1 billion, and $60 million to Bridgepoint Europe’s sixth fund, which closed at 5.5 billion euros ($6.24 billion) in December 2017.

The annual pacing target for the sovereign-wealth fund is between $550 million and $600 million across six to eight funds, documents said.

But “the current commitment pace for 2018 is appropriate given the age of the market cycle,” said Charles Wollmann, a spokesman for New Mexico SIC.

Last year the sovereign fund committed $437.5 million to six funds.

New Mexico SIC has taken several initiatives to manage its PE portfolio and increase transparency, Wollmann said.

David Lee, who was acting director of private equity, is now director of PE and has charge of the portfolio. He is assisted by Chris Cassidy, Wollmann said.

New Mexico SIC also initiated a subscription to Burgiss’s alternative-investment database for monitoring its private equity, real returns and real estate portfolio, Wollmann said.

The $200,100-a-year subscription to Burgiss’s support tools will help answer questions about performance, cash-flow measures, risk-return comparisons, portfolio exposures and more, documents said.

“This will enhance our internal staff’s due diligence and portfolio-monitoring ability and help us align better with our alternatives strategy,” Wollmann said.

Burgiss is used by several LPs including Alaska Permanent Fund, Employees Retirement System of Texas, Missouri State Employees’ Retirement System, Texas Permanent School Fund, Kentucky Retirement Systems and Abu Dhabi Investment Authority, documents said.

In addition, New Mexico SIC hired Colmore to monitor the PE-manager fees for its portfolio earlier in the year, Wollmann said.

London-based Colmore uses limited partnership agreements and financial statements GPs send to LPs to monitor management fees, carried interest and operational expenses being charged.

“Once Colmore receives the financial statements from the GP, we help LPs flag any out-of-line charges, and correct those in real-time,” said Ben Cook, Colmore’s chief executive.

The sovereign fund continues to restructure its PE portfolio with larger commitments to fewer GPs to create a pool of 30 core relationships and 75 to 100 funds, documents said.

New Mexico SIC had commitments across 119 funds as of March 31, 2018. Buyout funds numbered 67, growth equity funds were 17, special situations funds were 23 and venture capital funds numbered 12, documents said.

New Mexico SIC’s buyouts portfolio produced a 12.5 percent internal rate of return, special situations produced 8 percent and growth equity produced a 9 percent IRR, as of March 31, 2018, documents said.

New Mexico SIC is also increasing its ex-North America portfolio, documents said.

North America had a private equity allocation of 64 percent, Europe an allocation of 17 percent and Asia and other emerging markets had a 9 percent allocation as of March 31, 2018, documents said.

New Mexico SIC’s private equity relationships include TPG Capital, Nordic Capital, Landmark Partners and Ares Capital.

The fund’s private equity portfolio returned 13.26 percent over one year, 9.96 percent over three years and 7.65 percent over 10 years as of June 30, 2018.

The council manages almost $22.4 billion in assets, comprising the $17.4 billion land grant and $5 billion severance tax permanent funds.

Action Item: Read more on New Mexico’s investments here https://bit.ly/2LJ09Uw