New Mexico PERA picks 2 credit managers, reduces assumed rate of return

New Mexico Public Employees Retirement Association, Santa Fe, hired two managers to invest a total of $400 million in multistrategy credit managed accounts, said Jonathan Grabel, chief investment officer for the $14.1 billion pension fund.

The pension fund hired Napier Park Global Capital for a $300 million complex credit strategy and Ellington Management Group for a $100 million strategic credit portfolio. Pension fund officials launched an RFP on March 15. BNY Mellon is doing the back-office work for the managed accounts.

Separately, the pension plan adopted a plan to implement its 5% opportunistic credit allocation. It is in the process of implementing a new asset allocation it adopted in May that reduced global equities but increased real assets and credit. The new allocation lowers global equities to 43.5% from 54.3% and increases real assets to 20% from 13.3% and credit (including opportunistic credit) to 15% from 6.3%.

In addition to hiring new multistrategy credit managers, pension fund officials will be increasing the portfolio sizes of existing credit managers. Guggenheim Investments' high-yield separate account is being increased to $210 million from $195 million, CVC Credit Partners' bank loan portfolio to $104 million from $54 million and Lazard Asset Management's emerging market debt portfolios to $420 million from $190 million.

Separately, the pension fund lowered its rate of return assumption to 7.25% from 7.75%. The new assumption is based on a 5% real rate of return plus a 2.2% inflation assumption. After 10 years — absent assumption changes made by the board — the inflation assumption will increase, resulting in the assumed rate of return rising back to 7.75%.

Also, New Mexico PERA reported a net return for the 12 months ended June 30 of 0.48%. The best-performing asset class during the period was real estate, earning 16.5%; the worst-performing asset class was liquid real assets made up of master limited partnerships, at -17.5%.