New York Common Launches Emerging Manager Co-Investment Fund

Pension: New York State Common Retirement Fund

Total Assets Managed: $150.1 Billion (Sept. 30, 2012)

Private Equity Assets Managed: $14.1 Billion

Private Equity Allocation / Target: 9.4% / 10%

Chief Investment Officer: Vicki Fuller

The $150 billion New York State Common Retirement Fund, one of the nation’s biggest emerging manager investors, has created a special $250 million separate account for private equity co-investments alongside such managers, according to a senior official at the fund.

The separate account, which will be managed by New York-based Farol Asset Management, has been seeded with an initial $126.3 million. The fund is expected to receive the balance after the initial three-year investment period.

Altogether, the New York Common Retirement Fund has roughly $2.3 billion invested with private-equity emerging managers. This latest fund is expected to be a strong component of the pension’s commitment to these firms.

The vehicle will be called the NYSCRF Pioneer Co-Investment Fund LP. The New York Common Retirement Fund is administered by Thomas DiNapoli, the state comptroller.

As with other separate accounts managed on its behalf, the pension fund will perform its own due diligence and have a right to veto investments suggested by Farol Asset Management, a firm led by Robert Azeke, managing partner. Terms of the separate account were not disclosed.

The senior official, who was not authorized to speak by name, said the pension fund was particularly attracted to the fact that co-investments are made on terms similar to those enjoyed by general partners, so that a large share of an investment’s performance will not have to be doled out to the GP as performance fees, better known as carried interest.

In its initial 3-year period, the new fund is expected to make between seven and 10 investments ranging in size between $7.5 million and $20 million each. Investments will likely range from buyouts to recapitalizations to private debt, the official said.

Although this is New York State Common Retirement Fund’s first pool earmarked to invest in emerging manager co-investments, this is not the first time the pension has made co-investments. In fact, the pension has another separate account, the Hudson River Co-Investment Fund, that is dedicated to non-emerging manager co-investments. That fund, which is managed by Hamilton Lane, made a $12.9 million investment in mattress-retailer Sleepy’s in May 2012. That investment was made alongside Calera Capital, a San Francisco based private equity firm.

As of press time, the Pioneer fund has not yet made any investments.