New Mexico State Investment Council, Santa Fe, is preparing to launch an RFP in the coming weeks for a manager to run a short-duration fixed-income portfolio, said Charles Wollmann, spokesman for the $20.5 billion endowment.
The council voted Monday to launch the RFP to manage cash in a liquid format while preserving the ability to earn some interest. Currently, cash in the portfolio is held in a J.P. Morgan U.S. Government Money Market Fund, managed by the council’s custodian, J.P. Morgan. The money market fund has returned about 0.01% for the year ended Sept. 30, “due to the Federal Reserve’s current zero interest rate policy and its effects on all short-term government bonds and on the market for U.S. Treasury repurchase agreements,” a council memo said.
The council is looking for a separately managed account that would make it easier for staff to position cash for capital calls for private investments and would allow staff to quickly reduce the duration of its fixed-income portfolio. The current size of the cash portfolio could not be learned by press time.
The RFP will be posted on the council’s website.
Separately, the council shifted its interim asset allocation to be closer to its long-term asset allocations for two endowments it oversees, the $14.6 billion Land Grant Permanent Fund and the $4.6 billion Severance Tax Permanent Fund.
The Land Grant fund’s real-return allocation is increasing by three percentage points to 8%, funded by cutting absolute return by two percentage points to 5% and private equity by one percentage point to 9%. Domestic equity is being cut by three percentage points to 32% and international equity is increasing by three percentage points to 18%. Unchanged allocations are fixed income at 20%, real estate at 8% and cash at zero.
The Severance Tax Permanent Fund’s real-return allocation is being boosted by two percentage points to 7% while decreasing absolute return by two percentage points to 5% and private equity by one percentage point to 9%. The international equity allocation is increasing by three percentage points to 18%, while domestic equity is being cut by two percentage points to 33%. Remaining the same are fixed income at 20%, real estate at 8% and cash at zero.
At its October meeting, the council had reduced the target annual investment return for the Land Grant Permanent Fund to 7% from 7.5%. The target annual investment return for the Severance Tax Permanent Fund was reduced to 6.75% from 7.5%.
The council also voted to make a follow-on commitment of no less than $494,000 and no more than $2 million to Psilos III, a $300 million private equity fund raised in 2005. Psilos III reached the end of its investment period and is seeking an additional $25 million to support four later-stage portfolio companies through to exit. The follow-on commitment gives the council means to protect its investment in the fund and its return from being diluted from investment by outside investors.