New Mexico Public Employees Retirement Association, Santa Fe, launched an RFI for an emerging markets equity manager to run $210 million, said Jonathan Grabel, chief investment officer for the $14.4 billion pension fund.
Pension fund officials are conducting the search because the incumbent, Parametric Portfolio Associates, has been managing the portfolio for eight years. It's PERA policy to conduct searches periodically. Only managers that are in the database of the pension fund's general investment consultant, Wilshire Associates, will be considered.
A selection is expected this spring.
Pension fund officials also expect to launch in the first half of the year RFPs for managers to run a $350 million stressed debt, mezzanine and unconstrained fixed-income portfolio and a $180 million high-yield mandate. Pension officials are also contemplating a search for a listed infrastructure manager. Pension fund officials would launch the search to help implement its 23% real asset allocation, which was increased by three percentage points last year.
Separately, the pension fund hired BNY Mellon as its new custody bank as a result of an RFP launched in September. Incumbent J.P. Morgan was invited to rebid.
Also at its meeting Feb. 6, New Mexico PERA's board also adopted a private asset pacing budget in which it is targeting commitments in 2015 of $400 million to private equity, $325 million to real assets and $200 million to real estate. The targets are for vintage year diversification, Mr. Grabel said. Currently New Mexico has a $670 million private equity portfolio, $300 million real assets portfolio and $250 million real estate portfolio.
The board also adopted an implementation plan for reducing its hedge fund portfolio to a 4% target allocation from 7%, which would reduce the $1.1 billion portfolio to $600 million. As part of the plan, PERA officials are reducing the number of hedge fund managers to 15 managers from 22 managers. The remaining managers will all have their portfolios reduced, Mr. Grabel said. The plan will take several quarters to implement given liquidity windows.
PERA officials are asking for full redemptions from six hedge fund managers: King Street Capital Management with $64 million; Archipelago Partners, $61 million; Ascend Capital, $58 million; Angelo Gordon's AG Super Fund, $31 million; BlueCrest Capital Management's BlueTrend, $27 million; and Claren Road Asset Management, $36 million.
“We don't want an overly diversified portfolio,” Mr. Grabel said. “This is not based on manager performance.”
In other action, pension fund officials concluded a fee study, the first in the pension fund's history, in which they determined among other things that by separating out the roughly 29% of its portfolio invested in non-core fixed income as part of new asset allocation adopted last year, it was able to tighten the investment guidelines of its existing core fixed-income managers resulting in $3 million or more than 40% savings in fees.
Fee reductions resulted in an opportunity savings of about $15 million for the entire pension fund, the report said. PERA's total investment cost of 58.9 basis points was below the benchmark cost of 70.2 basis points, according to CEM Benchmarking, which provided data for the study. The analysis was done by pension fund's staff and consultants Cliffwater and Wilshire Associates.