NYC pensions’ buyout-heavy PE portfolios come in over FY19 benchmarks

New York City Comptroller Scott Stringer released the City’s Comprehensive Annual Financial Report Thursday, providing some insights into the city pensions’ private equity investments.

The Comptroller’s Bureau of Asset Management oversees investments for the city’s pension systems, including New York City Employees’ Retirement System, Teachers’ Retirement System of The City of New York, New York City Police Pension Fund, New York City Fire Pension Fund and New York City Board of Education Retirement System.

The bureau managed $207.9 billion as of June 30. Of that, 6.1 percent, or about $12.8 billion, was in private equity. The city also had $9.3 billion in unfunded PE commitments, for a total exposure of $22.1 billion across 225 funds with 113 managers.

The overall system’s aggregated private equity performance was a net internal rate of return of 10.1 percent since inception as of June 30, which came in below its benchmark of 12.8 percent.

However, the bureau released individual reports for each of the pension systems in September that provide time-weighted returns:

  • NYCERS’s private equity portfolio had a market value of $4.7 billion as of June 30, and a 14.66 return for fiscal year 2019, beating its 12 percent benchmark;
  • NYC Teachers’ private equity portfolio had a $4.2 billion market value as of June 30 and a 16 percent return against the same 12 percent benchmark;
  • NYC Police’s PE portfolio had a $2.5 billion market value as of June 30, and a 14.3 percent return for the 2019 fiscal year, beating the 12 percent benchmark;
  • NYC Fire’s PE portfolio was valued at $943 million as of June 30, and returned 14.5 percent against the 12 percent benchmark;
  • NYC Board of Education’s PE portfolio had a $422 million market value as of June 30 and returned 16.26 percent against the 12 percent benchmark.

Across the city’s private equity portfolio, 62 percent was allocated to buyouts, 8 percent to special situations, 10 percent to growth equity, 10 percent to secondaries, 6 percent to co-investments, 1 percent to energy and another 4 percent split between venture, mezzanine and funds-of-funds.

The city made $3.1 billion in commitments in fiscal year 2019 to 11 funds with 11 managers, including $135 million as part of its in-house emerging manager program. In FY18, it made $2.5 billion in commitments to 12 funds with 12 different managers.

In September, the city hired Katja Salovaara and Cristian Norambuena as senior investment officers in private equity, according to sister publication Private Equity International.

PEI also reported in January that the city wants to launch a co-investment program.

Action Items: Read Stringer’s 2019 CAFR here. Read the 2019 Q2 reports for each pension system here: NYCERS, NYC Teachers, NYC Police, NYC Fire and NYC Board of Education.