The New Mexico State Investment Council has approved a $75 million commitment to KPS Special Situations Fund IV.
The commitment marks the first time New Mexico SIC has committed to KPS in more than a decade, having previously committed to KPS Special Situations Fund II in 2002. Fund IV will continue KPS’ strategy of making control investments in basic manufacturing, transportation and service businesses. The firm focuses on corporate divestitures and carve-outs, operational turnarounds, financial restructurings, businesses operating in bankruptcies and companies in out-of-favour industries.
“Historically they’ve had top quartile funds in all their previous funds,” New Mexico SIC spokesperson Charles Wollman told Private Equity International. “They’ve had very solid performance in years that are traditionally not great years for buyout funds. They’re basically one of the best performing funds in [our] entire portfolio.”
New Mexico SIC plans to commit around $450 million to private equity in 2013, having committed $450 million to the asset class in 2012. During the 12-month period ending 30 September, 2012, the $16.5 billion endowment’s private equity portfolio returned 5.9 percent, according to the council’s 2013 annual plan.
“Private equity investment returns have lagged average annual expectations this year, but given the lagging nature of reporting, the picture should improve toward a more normal outcome in the next two or three quarters,” the report said. “On a look-forward basis for 2013, opportunities for return look richest in the growth & expansion area and the small-, middle-, large- and mega-buyout area in North America.”
Last month, New Mexico approved a $25 million commitment to Brookfield Capital Partners Fund III.
New Mexico SIC committed to six private equity managers in 2012: Ares Corporate Opportunities IV, Asia Alternatives Capital Partners III, Coller International Partners VI, Nordic Capital VIII, Pine Brook Capital Partners II and TowerBrook Investors IV. The endowment has a 10 percent target allocation to private equity and an actual allocation of roughly 10.5 percent.
PEI takes an exclusive look at the overhaul of the New Mexico State Investment Council in the March issue of Private Equity International.