New Mexico State Investment Council’s private equity program saw a big gain in the first quarter, but the system underperformed its benchmark, driven in part by drag from a legacy portfolio.
Still, the system is on track to keep up its commitment pace as it builds toward its long-term allocation target of 12 percent, according to New Mexico SIC’s most recent private equity review.
The system’s national private equity portfolio underperformed the Cambridge US PE Index by 1.44 percent, even as the program experienced a $295 million net gain in Q1.
“One reason for missing the Cambridge benchmark would be the SIC’s limited exposure to the venture class in our portfolio, and while we are addressing this in recent quarters with new relationships and more investments, it takes time to deploy meaningful capital in that strategy for a fund like ours,” said Charles Wollmann, director of communications, legislative and client relations for the New Mexico SIC.
“We also have a small legacy portfolio that continues to drag on performance versus the benchmark,” Wollmann said. “Generally, we have seen qualitative improvement and above median performance in PE the last five years.”
The sovereign fund’s private equity portfolio generated a 9.6 percent return in the first quarter, down from the 12 percent generated in Q4. “Performance has been very strong, distributions have been very high,” said David Lee, NMSIC’s director of private equity, who presented to the SIC on August 24.
Distributions outpaced contributions by $102.5 million in the first quarter, according to the Mercer presentation.
The presentation showed that in Q1, buyout, growth and special situations generated net gains of $189.4 million, $58.5 million and $47.3 million, respectively, while venture capital incurred a loss of $0.3 million. Mercer also showed that 66 funds reported net gains, while 34 funds reported net losses.
For fiscal 2021, the SIC committed $305 million to five funds across four managers and is working to close a few commitments by the end of the year, the report said. Commitments include: $50 million to JMI Equity Fund X, $100 million to TA XIV, $40 million to TA Select Opportunities II, $75 million to Hellman & Friedman Capital Partners X and $40 million to ICONIQ Strategic Partners VI.
Correction: This has been updated to correct David Lee’s title. He is affiliated with NSMIC, not Mercer.