Alternatives Briefs:New Mexico council to commit $360 million

SANTA FE, N.M. — New Mexico State Investment Council plans to commit a total of $360 million this year to private equity funds, about the same as last year, confirmed Charles Wollman, spokesman. Half of the 2008 amount has already been committed, he said. Board members of the $15.8 billion council, as early as the June 24 meeting, will consider whether to commit $50 million to private equity fund Welsh, Carson, Anderson & Stowe XI. The council has an 8% target allocation to private equity.

NEW YORK — Smaller and newer hedge funds have better performance, according to an analysis from PerTrac Financial Solutions, an investment software developer. Meredith Jones, managing director, analyzed 12 years of hedge fund data for the period from Jan. 1, 1996, through Dec. 31, 2007. Using two measures, fund size (less than $100 million, $100 million-$500 million and over $500 million) and fund age (up to two years old, two to four years and over four years), Ms. Jones sorted hedge funds into these categories and calculated the mean monthly fund return to create three age-based indexes and three indexes based on fund size.

Ms. Jones’ analysis of the size-related index found that the smallest funds had the best average performance in 2007 at 11.74% compared with 10.27% for medium-sized funds and 10.22% for the largest funds. Over the 11-year period, the smallest funds returned an annualized average return of 16.01%, compared with 12.5% for the middle category of funds and 11.5% for the biggest.

The same pattern was repeated when hedge fund returns were analyzed by age. In 2007, funds less than two years old returned an average of 15.02%, followed by funds older than four years with 9.53%, and those between two and fours years old, 9.45%. Annualized returns over the 12-year period for the youngest funds averaged 18.33%, compared with 14.55% for the middle-term funds and 12.84% for the oldest funds.

LONDON — British private equity funds’ 10-year internal rate of return was 20.1% for the period ended Dec. 31, up from an 18.7% 10-year return in 2006, according to the 2007 Performance Measurement Survey by the British Private Equity and Venture Capital Association, PricewaterhouseCoopers and Capital Dynamics. U.K. private equity had returns of 38.8% for three years and 27.3% for five years in the 2007 survey, compared with 31.3% and 20.9%, respectively, in the 2006 survey. The 2007 data is based on surveys of the association’s 422 private equity and venture capital fund members.

WASHINGTON — Seventy-four percent of limited partners expect to increase commitments to emerging markets private equity funds over the next three to five years, according to an Emerging Markets Private Equity Association survey. Net returns for such private equity funds from 2008 commitments are expected to be 23%, similar to expectations in the 2007 survey. Survey respondents cited the promise of superior risk-adjusted returns as the most important reason for increasing commitments; diversification was the most important reason given in last year’s survey. Eighty-nine percent expect to invest in Asia within three to five years; 75% plan to invest in Central and Eastern Europe.

The survey was conducted from February through April 2008. There were 81 respondents.