NYSTRS PE portfolio underperforms benchmark

The $107.5bn state pension’s private equity failed to outperform its benchmark for all six time periods observed as of 30 September.

The private equity portfolio of the New York State Teachers’ Retirement System (NYSTRS) missed its performance benchmark across multiple timeframes ending 30 September.

According to NYSTRS’ materials for the investment committee meeting taking place 25 January, the $107.5 billion pension fund’s private equity programme came short of the performance produced by its benchmark for one-, three-, five- and 10-year periods.

The Albany-based pension had the largest gap for the one-year span, generating a 11.7 percent return versus the benchmark 20.4 percent. The 10-year period saw the smallest difference, at 11 percent performed by NYSTRS and 12.2 percent by the benchmark, which is made of the S&P 500 Index plus 5 percent.

It produced identical returns as its benchmark for the 15- and 20-year periods, at 12.1 percent and 12.9 percent, respectively, failing to outperform for all periods observed, as of 30 September.

Its private equity net internal rate of return since inception stood at 12 percent, with a 1.6x net multiple as of 30 September, the material showed.

The pension, which allocated 7.6 percent – or $8.17 billion – to private equity as of 30 June, has been a long-time investor in the asset class, having committed to funds as far back as 1985, according to PEI data.

The pension’s 7 percent private equity target allocation was raised to 8 percent in August, after it reviewed its allocations to different asset classes. It added high-yield bonds and decreased the target allocations to domestic equity by 2 percent and to domestic fixed income by 1 percent, according to an August document summarising that month’s board meeting.

The same meeting materials for 25 January showed that NYSTRS made six private equity commitments totaling about $456 million throughout the fourth quarter of 2016.

The pension backed the debut fund of healthcare-focused Amulet Capital Partners with a $50 million commitment. According to a US Securities and Exchange Commission filing from June, Amulet Capital Fund I had raised $145 million toward its $250 million target at that time.

NYSTRS also committed $50 million to energy-focused EIV Capital Fund III, which had raised $343 million toward its $450 million target as of December, according to PEI data.

East Asia-focused MBK Partners Fund IV, which closed in December on $4.1 billion ahead of its $3.5 billion target, received a $100 million commitment from NYSTRS, as did mid-market fund Veritas Capital Buyout Fund VI, which launched in November and is targeting $3 billion, according to PEI data.

European mid-market fund TDR Capital Fund IV, which launched in September with a hard-cap of €2.85 billion, secured €70 million (approximately $73 million at the time of commitment on 21 December) from NYSTRS, and an $83 million commitment to ABRY Senior Equity V approved on 19 January, as confirmed by the NYSTRS spokesman.

The meeting material showed that, as of 31 December, the pension fund had 217 active partnerships through 90 fund managers, and $19 billion in active commitments.

In addition to performance and commitments made, the document also outlined that NYSTRS renewed its contract with Aon Hewitt Investment Consulting and Aon Company as its general investment consultant and advisor, beginning 1 February. Their private equity consultant remains TorreyCove Capital Partners, whose contract with NYSTRS was renewed for one year on 1 May.