NY State Common commitments soar as prices rise

  • $178.3 bln pension commits $6.4 bln over previous four quarters
  • Total more than any period since 2007
  • NY Common allocates larger amounts to fewer managers

New York State Common Retirement Fund committed more than $6.4 billion to private equity and venture capital over the past year, more than any period since 2007, according to a Buyouts analysis of its investment disclosures.

New York’s investment pace intensified in each of the past three quarters as commitments soared to around $2 billion. The only time the $178.3 billion retirement fund’s approached a similar peak was in third-quarter 2007, shortly before the global financial crisis hamstrung many general partners’ ability to raise capital, Buyouts found (see NYSCRF Quarterly Commitments). New York State’s publicly available investment disclosures date back to February 2007.

New York State Common Retirement Fund’s escalating commitments coincide with a period in which general partners face an increasingly difficult deal environment. Price-to-EBITDA multiples remain firmly in double digits, and as of June 30, total industry dry powder had increased by 7 percent to $1.3 trillion, according to Preqin data.

“Managers will either have to pay a hefty multiple to win quality assets, or devote a significant amount of time and effort to help rebuild and grow distressed or tier-2 assets acquired at lower valuations,” data provider Pitchbook wrote in a recent breakdown of the U.S. private equity market.

While New York State Common Retirement Fund’s staff considers market pricing in its private equity investment pacing, the pension’s recent activity represents an effort to bring its allocation closer to its long-term target of 10 percent, spokesman Matthew Sweeney told Buyouts in an email. New York State Common Retirement Fund held 7.6 percent of its assets in private equity as of Dec. 31.

Recent allocations include large commitments to flagship offerings from many of its most prominent general partners, according to the investment disclosures.

In March, New York’s most active month since at least 2007, New York committed almost $1.6 billion to new private equity funds. The total included $700 million across a pair of vehicles managed by Vista Equity Partners. Kohlberg Kravis Roberts & Co’s North American flagship fund picked up a $600 million commitment and the pension finalized a $240 million allocation to Warburg Pincus’s 12th flagship buyout vehicle.

“The increase that you’ve seen is part of a long-term plan to achieve the target,” Sweeney wrote in an email. “Like many limited partners, the CRF is engaged in rationalizing its PE portfolio by managing the number of relationships and increasing commitments to key managers.”

Other pensions have also scaled up their commitments in the past year. The comparably sized California State Teachers’ Retirement System committed more than $3.9 billion to private equity strategies in 2015, a 35 percent increase from its 2014 total.

Oregon Investment Council, which slashed its target allocation by an eighth to 17.5 percent in 2015, plans to commit between $2.5 billion and $3 billion to private equity in 2016. The council committed $2.3 billion to the asset class in 2015.

New York State Common Retirement Fund valued its private equity portfolio at $14.2 billion as of March 31, according to its most recent annual report. The portfolio netted a 12.93 annualized 10-year return as of the same date. State Comptroller Thomas DiNapoli is the retirement fund’s sole trustee.