New Mexico State Investment Council committed up to $160 million to three alternative investment managers, said Charles Wollmann, director of communications for the $19 billion Santa Fe-based endowment.
The investment council committed $75 million each to Ares Management's new debt and credit fund, Ares Special Situations Fund IV, and Brookfield Asset Management real estate debt fund Brookfield Real Estate Finance Fund IV. It also committed up to $10 million to venture capital fund Epic Ventures V for its in-state private equity portfolio.
Ares Special Situations Fund IV will focus “on dislocated and out-of-favor assets, primarily first- and second-lien bank loans and high-yield bonds as well as equities and other securities in reorganized entities that are trading at stressed or distressed levels,” according to materials presented to the board by Ares and one of the council's private equity consultants, LP Capital Advisors. The fund will also invest in collateralized loan obligations and non-performing loans on an opportunistic basis.
The Brookfield fund includes new high-yielding loans for commercial real estate borrowers.
Epic's fifth fund targets early-stage venture capital investments. The fund will invest in companies located in the Mountain and Western states, including New Mexico. Sun Mountain Capital, the endowment's consultant for the in-state private equity program, assisted.
The council has invested with each of the managers in the past.
Separately, the council changed its real-return investment policy to create a single policy for the asset class, rather than individual investment policies for each component suballocation. The real-return portfolio includes real assets — agriculture, commodities, infrastructure, timberland, energy and farmland — and financial assets, which include inflation-linked financial instruments. The 10% real-return allocation has two components: 6% real assets and 4% financial assets. The policy ranges for real assets is 60% - 80% and financial assets, 20% - 40%.
The investment council opted to develop a single investment policy for the real-return asset class, in part, because it “allows for a more tactical approach to allocating capital between real assets and financial assets during market cycles,” according to a May 27 staff memo to the council.