New Mexico Educational earmarks $105 million for 3 managers, lowers rate of return

Updated with correction

New Mexico Educational Retirement Board, Santa Fe, committed a total of $105 million to alternative investment funds, said Bob Jacksha, chief investment officer of the $12 billion pension fund, in an email.

The pension plan at its April 20 investment committee meeting committed $50 million to Z Capital Special Situations Fund III, a distressed fund managed by Z Capital Partners with a $1 billion fundraising target. The pension fund has invested in prior Z Capital funds.

Pension fund officials also committed $30 million to Water Property Investors II, managed by Water Asset Management. The fund is targeting between $250 million and $350 million and would acquire water rights through farmland acquisitions. New Mexico Educational has invested with WAM in the past.

The pension fund committed $25 million to a separately managed account in infrastructure credit managed by Stonepeak infrastructure Partners. The separate account will acquire discounted infrastructure debt. The pension plan has invested in two prior Stonepeak infrastructure equity funds.

The investment with Stonepeak is expected to act as a diversifier to the pension fund's portfolio in that officials expect little correlation with other debt and the pension fund has very little, if any, exposure to infrastructure debt, Mr. Jacksha wrote.

In other action, the board at its April 21 meeting lowered its assumed rate of return to 7.25% from 7.75% and its inflation assumption to 2.5% from 3%. The board approved the changes following an experience study performed by its actuary, Gabriel Roeder Smith & Co.

Separately, the pension plan renewed contracts with equity managers Fidelity Institutional Asset Management, which manages $300 million, and BlackRock (BLK), $278 million. Both manage Europe, Australasia and Far East portfolios. The pension fund also renewed Mondrian Investment Partners' $373 million and Neuberger Berman's $300 million emerging markets equity allocations.

Also, the investment committee expects to commit $325 million per year in 2017 and 2018, according to a private equity pacing plan. Pension plan officials expect to hit its net asset value goal of 13% of total plan asset value in private equity sometime in 2018.