New York State Teachers’ Retirement System’s private equity program had 12.1 percent returns in fiscal year 2019, below its 15.4 percent benchmark, according to materials posted on its website ahead of the board’s Oct. 30 investment committee meeting.
NYS Teachers’ three-year, five-year and 10-year returns all missed their benchmarks as well. Three-year returns were 15.8 percent versus a 19.2 percent benchmark, five-year returns were 14.2 percent versus a 15.7 percent benchmark and 10-year returns were 14.8 percent versus a 19.7 percent benchmark.
The $119.9 billion fund’s total private equity portfolio had $21.4 billion in active commitments as of Sept. 30, $8.9 billion in adjusted market value, and $6.2 billion in unfunded commitments, with 225 active partnerships across 89 sponsors.
The fund also provided information on a separate private credit portfolio it launched on July 1, 2017. As of June 30, it returned 10.1 percent against a 7 percent benchmark. As of Sept. 30, the portfolio had $1.7 billion in active commitments, $578.1 million in adjusted market value and $661.5 million in unfunded commitments.
PE portfolio make-up
Buyouts made up a huge amount of NYS Teachers’ portfolio as of Sept. 30. Small and medium buyouts made up 48 percent of its total exposure and large and mega buyouts made up 24 percent, for a 72 percent total in buyouts. Other investment types included funds-of-funds (6 percent), co-investments (8 percent), secondaries (4 percent), growth and venture capital (6 percent) and turnaround (5 percent).
Credit was the best-performing investment strategy, with a 22.3 percent internal rate of return since inception as of June 30. However, those returns are on holdings from inception until the separate private-credit asset class was launched in 2017.
Turnaround had a 19.2 percent IRR, small/medium buyout 16.1 percent, large/mega buyout 14.4 percent and secondaries 12.0 percent. Growth and venture had an 8.1 percent IRR, co-investments 8.2 percent, and fund of funds 8.2 percent.
“We expect returns in the private debt portfolio will generally remain in line with current returns,” spokesman John Cardillo told Buyouts in an email. “In other words, over the long haul, we expect private equity to outperform private debt.”
NYS Teachers’ private equity activity was heavily focused on North America, investing 72 percent of its exposed market value there, with only 19 percent in western Europe and 9 percent in the rest of the world. IT accounted for 34 percent of that market value, with 15 percent in health care, 14 percent in industrials and 12 percent in consumer discretionary.
Its private debt was not as concentrated on North America, with 58 percent there, 38 percent in Western Europe and 4 percent in the rest of the world.
Private equity and credit commitments
NYS Teachers also announced the following private equity and credit commitments:
• $40 million to SKCP Catalyst Fund I, a lower middle market buyouts fund managed by SK Capital and launched in August, according to a Form D;
• $100 million to Cortec Group Fund VII, a middle market buyouts fund managed by Cortec Group;
• $150 million to HarbourVest/NYSTRS Coninvest Fund III, a separately managed account with HarbourVest that will focus on growth equity;
• $200 million to Orion Energy Credit Opportunities Fund III, managed by Orion Energy Partners.
Action Item: read the NYS Teachers’ meeting packet here.