LPs

New Mexico SIC plans on allocating more to PE in the coming years

The sovereign wealth fund is the latest institutional investor that could inject liquidity into the starved PE marketplace.

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New Mexico State Investment Council plans on increasing its private equity commitments over the next four years.

New Mexico, with its increased pacing, along with a recent rejuggling of its asset allocation, is the latest institutional investor to take steps that would provide badly needed liquidity to a capital-thin private equity ecosystem.

New Mexico plans on committing $1.3 billion to private equity in FY 2024, up from the estimated $1.18 billion scheduled for the past fiscal year. This number increases to $1.48 billion in FY 2025, $1.64 billion in FY 2026 and $1.8 billion in FY 2027, according to its latest annual investment plan.

Council members approved the new annual investment plan at its June 27 meeting. Buyouts watched a broadcast of the meeting.

In past years, New Mexico’s annual commitments to private equity ranged between $500 million and $700 million, according to last year’s annual investment plan.

New Mexico SIC approved increased PE targets for several of the funds it manages at its April meeting, prompting the planned pacing hikes.

The $27.5 billion Land Grant Permanent Fund, the largest pool of money New Mexico SIC manages, will now have a 15 percent target, up from 13 percent.

The $7.6 billion Severance Tax Total Fund will see its PE target move to 10 percent from 5 percent. The Severance Tax Total Fund is also expected to grow due to recently passed state legislation that changes its funding formula and could increase its contributions by $1 billion annually for the next decade, according to the investment plan.

Other smaller funds under New Mexico SIC’s management will also have increased private equity targets – including the creation of a new PE sleeve with a 25 percent target for its $13.4 million fund Rural Libraries Endowment Fund.

The pacing plan will tail off starting in FY 2028 as these funds start to reach their targeted allocations, according to the presentation. In FY 2028, the system plans $878 million in PE commitments before moving its way back over to $1 billion in FY 2031 and FY 2032, according to the investment plan.