The $156.6 billion New York State Retirement fund, the third-largest US pension plan, made a return of 500% on a private equity investment in June after a year, highlighting the contribution by alternatives to the scheme’s returns, the Financial News reports.
The fund, through High Peaks Venture Partners, invested $447,000 in May last year in Pump Audio, a New York music-licensing company as part of its in-state private equity investment program.
Photography company Getty Images bought Pump Audio in June for $42 million, providing the plan with its most successful investment.
The in-state program was launched in 1999 and a total of $836m is now allocated with $564m available for investment through 16 private equity managers. However, the global private equity portfolio was $514.7 billion at the end of March, 9.4% of the scheme’s total funds.
Investors are always looking for a smash hit,” says Thomas DiNapoli, New York state comptroller. “We have found one right here in New York state.
DiNapoli is sole trustee of the New York State Retirement fund. The scheme comprises the New York State Employees’ Retirement System, established in 1921, and the Police and Fire Retirement System, which the state legislature created in 1966. With more than one million participants, it is the second-largest scheme in the US and the third-largest by asset value.
The fund returned 12.6% last year, exceeding the 8% actuarial assumed rate of return and the 11.95% long-term average annual return. The report said particularly good results were generated from international equity, real estate and alternative assets.
The fund’s private equity portfolio, which uses Hamilton Lane Advisors as a consultant, aims to provide returns 500 basis points above public equity markets. It includes venture capital, special situation funds and funds of funds.
Private equity generated a 28.7% one-year return and accounted for 6.5% of the fund’s total investments in the last financial year. The allocation is unlikely to change because state laws limit the fund’s investments beyond investment-grade bonds and domestic equities.
The scheme expects to continue to allocate between $3 billion and $3.5 billion per year, about 7% of its money, to private equity, although the commitment period is likely to increase as credit conditions have worsened. The fund has significant exposure to the large buyout firms that make up about 60% of its annual commitments.
The fund has committed $1.3 billion to private equity group Blackstone in six funds as of 31 March, according to its Web site. In 1993 it committed $50 million to Blackstone Capital Partners II. By 2005, the pension fund’s commitment to Blackstone Capital Partners V had risen to $675m.
Other long-running relationships include Kohlberg Kravis Roberts, Warburg Pincus and Providence Equity Partners, which specializes in media buyouts. The fund has committed $1.6 billion to KKR in five funds since 1987, including $600 million in the KKR 2006 fund. The scheme’s contribution of $370 million in KKR’s 1987 fund has also more than doubled to $827 million.
The scheme has committed $1.3 billion to Warburg Pincus since 1989 and $834m to Providence since 1996. Its $50 million commitment to Providence has more than tripled to $181 million.