New Mexico State Investment Council, Santa Fe, adopted its annual investment plan for 2024 at its meeting Tuesday spokesman Charles Wollmann said.
The council oversees $43.1 billion in endowments.
Robert "Vince" Smith, deputy state investment officer and chief investment officer, said at the meeting that 2022 was the worst year for the 70/30 portfolio since 2008 and was the pivot to a new investment environment.
Staff continues to expect the current economic expansion to end in a recession this year, which will "be stubbornly long, with more pain in the 'financial' economy than the 'real' economy," and that the early part of the new economic cycle will be unimpressive relative to the average of the early parts of previous cycles, a staff memo said.
This means that the council will have to shift the portfolio to withstand a low-growth environment, an investment environment that will look very different from the past 10 years or the 25 years before that, Mr. Smith said. Staff will recommend an interim asset allocation later in the year, he added.
As part of the 2024 plan, the council would maintain a significant focus on U.S.-based dollar-denominated investments, with some focus on opportunistic international investments and greater exposure to private-market assets over publicly traded assets.
Council officials plan to commit an estimated $5.9 billion in 2024 to private markets, down from an estimated $6.4 billion in 2023. The 2024 total private markets commitment includes an estimated $2.4 billion to private credit, $1.3 billion to private equity, $1.1 billion to real estate and $1.1 billion to real return.
The council's real estate portfolio has a 12% target allocation with $3.8 billion invested as of Dec. 31. In real estate, council officials expect to maintain underweights to retail and office properties and overweight industrial while seeking to increase exposure to multifamily assets.
Real return also has a 12% target, with $3.1 billion invested as of Dec. 31. In 2024, council officials expect to make new commitments to traditional and energy transition-focused infrastructure with less invested in conventional energy, particularly upstream energy, which includes oil and gas exploration and drilling. Staff said the private equity investment pacing plan is coming soon.