New York State inks $800 mln co-investment account with Neuberger Berman

The New York State Common Retirement Fund committed $800 million to a co-investment account managed by Neuberger Berman in September, its largest single allocation to private equity since the start of the decade.

Neuberger Berman will invest the $800 million through four equally-sized tranches, primarily in deals sourced through the Common Retirement Fund’s existing private equity managers, according to a monthly transaction report.

The new account with Neuberger Berman is New York’s fourth allocation to a co-investment vehicle in the last year, bringing its 12-month total for co-investments to more than $1 billion, according to pension documents.

LPs often co-invest alongside fund managers on a no-fee and no-carried interest arrangement to develop low-cost exposure to private equity. The strategy became increasingly popular in recent years as institutional investors sought ways to reduce external management costs. In April, Cambridge Associates estimated LP co-investments make up more than 5 percent of overall private investment activity.

New York State Common Retirement Fund continues to invest in traditional private equity funds. In September, the $184.5 billion pension committed $400 million to RRJ Capital Master Fund III for investments in Southeast Asia and China. RRJ Capital set a $4 billion target with a $4.5 billion hard cap.

The previous month, New York backed Apollo Global Management’s $3 billion natural resources fund for $400 million.

The pension also committed $87 million to Clearlake Capital Group’s fourth flagship fund in August. Fund IV held a final close on $1.38 billion in September.

All of the pension’s August and September fund commitments were re-ups to managers with which the system invested in the past.

New York State Common Retirement Fund declined to comment.

The pension had a 7.7 percent allocation to private equity as of March 31, 2.3 percentage points short of its long-term target, according to its annual report.  Its private equity portfolio delivered a 10-year annualized return of 12.93 percent, a little less than a percentage point short of the Cambridge U.S. Private Equity Index benchmark.