New Mexico SIC commits $175m to TPG

The State Investment Council committed to TPG’s Asia Fund VI and Opportunities Partners Fund III.

The New Mexico State Investment Council has committed up to $175 million to two TPG Capital funds, according to documents from the pension’s Tuesday board meeting.

New Mexico committed $100 million to TPG Asia Fund VI, which is targeting $3.5 billion.

“We like the pan-Asia approach. These are very rapidly dynamic changing markets”, said a member of New Mexico’s investment team at Tuesday’s meeting.

Fund VI, which reportedly decreased its target from $4 billion, has made three investments to date in Australia and China, including Phoenix Satellite TV, a former Rupert Murdoch-led company the firm acquired for $213 million last October, according to New Mexico documents.

TPG Asia’s prior fund closed on $3.84 billion in 2008. All five funds have an aggregate gross internal return rate of more than 20 percent per year, according to New Mexico documents.

TPG Asia focuses on the financial services, consumer retail, healthcare and energy sectors, investing in mid- and large-sized companies and turnaround situations by acquiring equity securities and public and private debt. As of 31 October, 2013, TPG Asia had invested in 57 total companies, the majority of which have been in China. About $9.4 billion has been fully realised via portfolio company exits.

“[Exiting] is very difficult in Asia,” said TPG co-founder Jim Coulter at the investment council meeting. “There is much more capital going in than what’s going out.”

New Mexico also committed up to $75 million but no less than $50 million to TPG Opportunities Partners Fund III, a credit and special situations vehicle targeting $2.6 billion with a $3 billion hard-cap, according to a Pennsylvania Public School Employees’ Retirement System report investment memo. Fund III is scheduled to hold its final close in February, according to a New Mexico SIC spokesperson.

Other limited partners in the fund include the Washington State Investment Board, which committed $200 million, and the Public Employees Retirement Association of New Mexico, which committed $25 million to the fund.

Fund III will follow the same investment strategy as Fund II by investing in corporate distressed-for-control, special situations including non-performing loans, and corporate dislocations. TPG Opportunities is led by vice president and partner Alan Waxman.

TPG Opportunities raised its first standalone fund, the more than $2 billion TPG Opportunities Partners II, in 2011. Previously, the firm invested using capital from TPG’s sixth flagship fund and TPG Financial Partners, a $1.96 billion distressed fund.

Within New Mexico’s private equity portfolio, the pension has a target allocation to buyouts of between 50 percent and 70 percent and an actual allocation of 62 percent. Geographically, New Mexico’s private equity programme has a target allocation of between 10 percent and 20 percent to Asia and emerging market funds, with an actual allocation of 3 percent.

New Mexico plans to commit between $350 million and $450 million to between six and eight private equity managers for the next three to five years. The pension’s entire portfolio has a 10 percent target allocation to the asset class and a 9.5 percent actual allocation, as of 30 September, 2013.