NYC pensions committed $2.5 bln to PE in fiscal 2018

  • $200 bln pension assets, 6 pct allocated to PE
  • $2.5 bln pledged to PE in fiscal ’18, up from $1.6 bln
  • $240 mln in ’18 went to emerging-manager program

New York City Pension Funds committed $2.5 billion to 12 private equity funds in fiscal 2018 ended in June, according to the city comptroller’s annual financial report.

The comptroller’s office manages investments for the five city pension funds through the Bureau of Asset Management, with total pension-fund assets of $200 billion.

The pension funds have a combined $12 billion PE portfolio, representing a 6.1 percent allocation.

The system’s commitments to 12 funds managed by 12 managers were an increase from the $1.6 billion committed to PE funds for fiscal 2017, the report shows.

The city pension funds committed $240 million of their 2018 allocation to an in-house Private Equity Emerging Manager Program.

The pension funds’ PE portfolio remains diversified, with 64 percent allocated to buyouts, 9 percent to special situations, 8 percent to growth equity, 8 percent to secondaries, 5 percent to co-investment, 1 percent to energy and 4 percent to other, which includes venture capital, mezzanine and funds of funds.

Asset prices are high after exceptionally strong fundraising years in 2016 and 2017, driven by investor demand and the need to reinvest PE distributions from prior years’ commitments, the report says.

“Although valuations remain high, deal activity has not moderated as private equity managers and strategic buyers continue to compete for assets,” the report said.

“Managers have continued to focus on exit activity, given the strong M&A-driven valuations, and this has been a key driver of distributions and liquidity to investors. The industry has also witnessed a series of manager-led liquidity opportunities, fund restructurings and extensions, as managers and investors pursue solutions for funds that are approaching the end of their terms or managers seek capital for new funds, products or growth initiatives.”

The city pension funds’ PE distributions exceeded commitments in both 2017 and 2018, the report shows.

In 2018, they received distributions of $3.1 billion and funded $2.4 billion for new and existing investments. The previous year, they received $2.8 billion in distributions and allocated $1.9 billion to new commitments.

The funds have unfunded capital commitments of $8.2 billion, resulting in total PE exposure of $20.2 billion across 221 funds and 116 managers, according to the report.

Since inception, the PE program has generated a 10.3 percent net internal rate of return.

Action Item: Read the Comptroller’s 2018 annual financial report: