NYS Teachers’ builds PE program through new relationships

  • NYSTRS: 10 new relationships in past year, just 2 re-ups
  • New relationships with Valor, Orion formed in Q2
  • PE program valued at $8 bln

New York State Teachers’ Retirement System is building out its private equity portfolio at a rapid clip, having formalized 10 new relationships with PE managers in the past year, investment disclosures from the system show.

The $108 billion retirement system moved forward with just two re-ups in that period, allocating as much as $200 million to Silver Lake and up to $83 million with ABRY Partners, respectively.

In the quarter ended June 30, NYS Teachers’ finalized a $75 million commitment to Valor Equity Partners IV and a $100 million allocation to Orion Energy Credit Partners Fund II, according to an August investment disclosure. In July Executive Director and Chief Investment Officer Thomas K. Lee approved a $100 million allocation to ADV Opportunities Fund II, which is expected to close in September.

All three commitments are new relationships for the system.

A growing number of public pensions, particularly larger ones, spent the years after the global financial crisis concentrating their PE holdings among a smaller group of managers. Minimizing the number of managers in a portfolio can offer some relief to resource-constrained public-pension staffs, and PE firms occasionally reward investors with lower fees in exchange for larger fund commitments.

California Public Employees’ Retirement System and New York State Common Retirement Fund are increasingly investing larger amounts with just a handful of top managers. CalPERS put more than $1.5 billion across just three commitments in H1 2017.

“Like other pension funds, we look to consolidate managers when doing so is feasible and prudent,” NYS Teachers’ spokesman John Cardillo said in a statement. “However, that does not preclude us from adding new managers with strategies or geographies that are in line with our long-term strategic plan.”

NYS Teachers’ valued its PE portfolio at roughly $8 billion as of June 30. The portfolio has delivered a net internal rate of return of 12.09 percent and a net multiple of 1.59x since inception.

Action Item: More information on NYSTRS: www.nystrs.org