New Mexico considers withdrawal from TPG-Axon

The hedge fund, which launched in 2005, has underperformed since the financial downturn and has experienced significant turnover, leading the pension to recommend redeeming its capital.

The $11.7 billion New Mexico Public Employees Retirement Association is considering making a full redemption of its $35 million commitment to TPG-Axon Capital Management because of underperformance and turnover. 

The recommendation, which was put forward by the pension’s advisor, Cliffwater, will go before the full board later this month.

TPG teamed up with former Goldman Sachs executive Dinakar Singh in 2005 to launch TPG-Axon, which at the time was aiming to raise $3 billion.

TPG-Axon occasionally invests alongside the firm’s private equity funds. Recently, TPG sold its 23.9 percent stake in Parkway Holdings, a Singapore-listed provider of healthcare services, to Indian healthcare provider Fortis for $685.3 million. TPG first invested in Parkway in 2005 when its Asian affiliate Newbridge Capital and TPG-Axon bought a 26 percent stake for $188 million. The firm made subsequent investments in the company, reportedly investing just under $358 million total.

TPG-Axon has experienced some recent turnover. Eric Mandelblatt, a partner in the firm, left last year, reportedly taking eight professionals with him to start a new firm. The hedge fund announced a merger with hedge fund Montrica Investment Management last autumn, creating a firm with about $9.1 billion in assets.

The hedge fund was battered in the economic downturn in 2008 like many of its peers. However, TPG-Axon has not been able to recover like other funds, according to Joelle Mevi, New Mexico PERA’s investment director.

“They haven’t been able to make up the losses,” Mevi said. New Mexico PERA will pull its money out of the fund slowly, as it is restricted to taking its redemption in 25 percent chunks every quarter, Mevi added.

The pension has pulled capital from other hedge funds since 2008 because of performance, so the move is not unusual. It is also considering exiting some of its stakes in private equity funds through the secondaries market, though so far no specific funds have been identified, Mevi said.

“Discussions have been underway here,” Mevi said. “We’re getting familiar with the secondaries option, but we haven’t had any of our partnerships trigger serious consideration of that.”

New Mexico PERA has about $130 million budgeted for private equity this year, and has already committed about half that amount. The pension has a 5 percent allocation to the asset class.