New Mexico SIC to hire StepStone

The $14bn oil and gas endowment has been slowly getting back into private equity investing after a placement agent scandal left its programme in limbo.

New Mexico State Investment Council is set to hire StepStone Group as its national private equity advisor. Terms and conditions of the appointment are still being ironed out, according to a spokesperson for the endowment.

New England Pension Consultants had served as SIC’s interim advisor since Aldus Equity was fired in 2009 after its role in a wide-ranging pension pay-to-play scheme was first revealed in New York. New Mexico stopped making commitments after firing Aldus, but had been looking to get back into the asset class.

The endowment made small steps into private equity investing this year with several commitments, including a $50 million commitment approved this week to EIG Energy Fund XV, which is targeting $3 billion to $3.5 billion. SIC has also committed $40 million each to Lightyear Capital’s third fund and Ares Special Situations III.

StepStone will work with SIC in determining how best to commit the balance of the $275 million of capital the endowment allocated for private equity in fiscal year 2011. SIC’s long-term target to the asset class is 9 to 12 percent and its actual allocation was just under 10 percent in September.

SIC’s private equity advisor also will assist the endowment in assessing its portfolio and determining if a secondaries sale is needed. The endowment has been considering selling a number of interests on the secondaries market to make its portfolio more manageable.

This week, SIC approved selling holdings in real estate funds managed by Beal Companies and Northstar Companies, both of which were considered “strategic” exits as the portfolio is taking on an “additional core focus”, the spokesperson said, who declined to discuss valuations pending the sale. SIC’s Northstar commitment of about $90 million, which it made in 2005, struggled in the downturn and had a market value of about $12 million as of 31 March, 2010, according to a performance report from SIC.

The endowment also this week committed $100 million to Prudential Real Estate Investors’ core fund series PRISA.

StepStone has been on a roll in the past few years winning advisory contracts from institutions. The La Jolla, California-based firm, which spun out of Pacific Corporate Group, in November became the private equity consultant for Wisconsin’s state investment board, which oversees about $78 billion in assets. StepStone replaced Hamilton Lane.

In 2009, the firm was hired by AMP Capital Investors to manage and advise its Future Directions Private Equity Funds. AMP is a specialist investment manager with more than $101 billion in funds under management.