New York pension backs three funds of funds

The New York State Common Retirement Fund committed $550m in January, as the state’s comptroller has called for more flexibility in potentially increasing alternative investments.

The New York State Common Retirement Fund (CRF), the third-largest pension fund in the US, invested $550 million in three captive funds of funds in January while closing one real estate deal worth $300 million, according to the fund’s monthly transaction report.

The pension’s largest commitment was $250 million to NYSCRF Pioneer Opportunities Fund I, managed by Parish Capital Advisors. Parish also manages NYSCRF Pioneer Partnership Fund I, which received $100 million from CRF, while NYSCRF Pioneer Partnership Fund A, managed by Bank of America’s Capital Access Funds, got a $200 million commitment.

All three investments were the first for CRF in these funds, while no placement agents or intermediaries were used in the transactions. The pension made the commitments as part of its emerging manager private equity programme, which targets funds with assets under management below $750 million, as well as funds owned by women and minorities.

The emerging managers fund has more than $400 million invested through the programme, and the pension is expanding the programme by $1 billion in the next three years.

Parish Capital will use the $250 million for co-investment opportunities and $100 million for fund investments. Parish, which makes direct and  direct and secondaries, has an investor base that includes pensions, endowments, foundations and family offices, with around $1 billion under management.

In addition, in the real estate sector CRF also committed $300 million to Lake Montauk Real Estate Fund, managed by Franklin Templeton Real Estate.

CRF’s private equity investments accounted for 6.5 percent of its portfolio at the end of the last fiscal year, while real estate accounted for 4.4 percent. The pension’s investments in both areas have outperformed the stock market during the current recession, but are nearing their target allocation limits of 8 percent and 6 percent respectively.

In early February, New York Comptroller Thomas DiNapoli said in an address to union representatives that the fund had lost 20 percent of its value, and called for more flexibility in committing funds to investment vehicles other than stocks. DiNapoli has in the past urged regulators to lift the 25 percent cap on the pension’s alternatives allocation.