New Mexico State Investment Council intends to reshape its in-state private equity program following a history of underperformance, renaming the initiative and moving its strategy into venture capital investment.
The plan to reposition the New Mexico Private Equity Program was unveiled during NMSIC’s April 22 meeting, coinciding with the board approving an increase to the pension fund’s venture capital allocation. Affiliate title Buyouts listened to a live broadcast of the meeting.
NMSIC’s investment staff proposed the restructuring of its in-state private equity program, which was launched in 1990, citing the program’s net loss of $84.3 million as of June 30, 2024. The pension fund attributed the poor performance to a “historical lack of diversification.”
NMSIC’s staff also highlighted that co-investment performance had made a significant drag on the program’s returns. In 2019, co-investment funds made up 79 percent of the in-state program’s net asset value, with a sum value of $321.5 million.
Since then, this value has dropped to $127.3 million as of June 30, 2024, now representing 29 percent of the program’s net asset value. NMSIC’s staff did not disclose any changes to its co-investment strategy.
The newly restructured program, which will be named the NMSIC Strategic Venture Capital Program, will take what NMSIC calls a “‘market rate’ investment approach” that will look to diversify its investments in local funds.
Part of the process of diversification, the pension fund’s board documents noted, would be “taking a more flexible approach to what counts as economic impact in the state,” focusing more on job growth in the state rather than headquarter location.
“We believe that this program can produce a double bottom line, meaning it can generate both investment returns for us and economic impact in the state,” a member of NMSIC’s investment staff noted during the board meeting. “We’re starting to see early signs of this with investments we’ve been making since 2022.”
Research first began on the restructuring of the New Mexico Private Equity Program in 2019, according to NMSIC’s investment staff. Following the research, the pension fund’s staff began making these market rate commitments in 2022. The investment staff told the board that the new plan would be a formalization of investment practices that the pension fund has been engaging in since 2022.
Under the formalized plan, the venture capital program would have a target allocation of 9 percent of NMSIC’s Severance Tax Permanent Fund, which maintains an AUM of $9.7 billion. That translates to about $873 million, across private equity strategies broadly, with the majority being earmarked for venture capital. Select investments will be made in growth equity and buyout funds, which previously made up around 80-85 percent of the program’s commitments.
The new plan would see venture capital assets make up between 4 and 5 percent of the pension fund’s total AUM.
The program will aim to keep their commitments to between 20 and 30 managers, focusing on deep tech, climate tech, aerospace and defense, healthcare and life sciences, media and entertainment tech, and select software-driven sectors.
This change coincides with NMSIC’s decision to change its general private equity strategy allocation, which most notably increased NMSIC’s allocation to venture capital to a range of 10-25 percent from the previous range of 0-5 percent, as previously reported by Buyouts.
While some pension funds have been shying away from venture capital opportunities given a recent trend of tighter liquidity positions and macroeconomic volatility, NMSIC believes that is not in that same boat.
“I think we are uniquely positioned for the more challenging macro position we’re in right now,” NMSIC’s CIO Robert Smith told his board during the April 22 meeting. “We have an unusually high amount of liquidity and a solid long-term investment plan.”
New Mexico State Investment Council intends to reshape its in-state private equity program following a history of underperformance, renaming the initiative and moving its strategy into venture capital investment.
The plan to reposition the New Mexico Private Equity Program was unveiled during NMSIC’s April 22 meeting, coinciding with the board approving an increase to the pension fund’s venture capital allocation. Affiliate title Buyouts listened to a live broadcast of the meeting.
NMSIC’s investment staff proposed the restructuring of its in-state private equity program, which was launched in 1990, citing the program’s net loss of $84.3 million as of June 30, 2024. The pension fund attributed the poor performance to a “historical lack of diversification.”
NMSIC’s staff also highlighted that co-investment performance had made a significant drag on the program’s returns. In 2019, co-investment funds made up 79 percent of the in-state program’s net asset value, with a sum value of $321.5 million.
Since then, this value has dropped to $127.3 million as of June 30, 2024, now representing 29 percent of the program’s net asset value. NMSIC’s staff did not disclose any changes to its co-investment strategy.
The newly restructured program, which will be named the NMSIC Strategic Venture Capital Program, will take what NMSIC calls a “‘market rate’ investment approach” that will look to diversify its investments in local funds.
Part of the process of diversification, the pension fund’s board documents noted, would be “taking a more flexible approach to what counts as economic impact in the state,” focusing more on job growth in the state rather than headquarter location.
“We believe that this program can produce a double bottom line, meaning it can generate both investment returns for us and economic impact in the state,” a member of NMSIC’s investment staff noted during the board meeting. “We’re starting to see early signs of this with investments we’ve been making since 2022.”
Research first began on the restructuring of the New Mexico Private Equity Program in 2019, according to NMSIC’s investment staff. Following the research, the pension fund’s staff began making these market rate commitments in 2022. The investment staff told the board that the new plan would be a formalization of investment practices that the pension fund has been engaging in since 2022.
Under the formalized plan, the venture capital program would have a target allocation of 9 percent of NMSIC’s Severance Tax Permanent Fund, which maintains an AUM of $9.7 billion. That translates to about $873 million, across private equity strategies broadly, with the majority being earmarked for venture capital. Select investments will be made in growth equity and buyout funds, which previously made up around 80-85 percent of the program’s commitments.
The new plan would see venture capital assets make up between 4 and 5 percent of the pension fund’s total AUM.
The program will aim to keep their commitments to between 20 and 30 managers, focusing on deep tech, climate tech, aerospace and defense, healthcare and life sciences, media and entertainment tech, and select software-driven sectors.
This change coincides with NMSIC’s decision to change its general private equity strategy allocation, which most notably increased NMSIC’s allocation to venture capital to a range of 10-25 percent from the previous range of 0-5 percent, as previously reported by Buyouts.
While some pension funds have been shying away from venture capital opportunities given a recent trend of tighter liquidity positions and macroeconomic volatility, NMSIC believes that is not in that same boat.
“I think we are uniquely positioned for the more challenging macro position we’re in right now,” NMSIC’s CIO Robert Smith told his board during the April 22 meeting. “We have an unusually high amount of liquidity and a solid long-term investment plan.”
