New Mexico Public Employees Retirement Association, Santa Fe, restructured its $1.3 billion alternative liquid credit portfolio to reduce the portfolio from an overweight position and reallocate the capital to illiquid credit investments, according to staff reports.
The $18.4 billion pension plan's alternative liquid credit portfolio amounted to 49.7% of its $2.7 billion credit-oriented portfolio and 7.3% of the total fund, more than 3 percentage points over its 4% target allocation.
As part of the restructuring, New Mexico PERA officials are seeking full redemptions on a $226 million multistrategy credit mandate managed by Napier Park Global Capital, $172 million from a hedge fund managed by Anchorage Capital Group, a $62 million Eagle Point Credit Partners collateralized loan obligation equity portfolio and a $43 million investment in distressed debt hedge fund Canyon Value Realization Fund.
New Mexico PERA will seek partial redemptions of $50 million each from credit hedge fund Ellington Enhanced Income Fund and from Mudrick Stressed Credit Fund, a stressed performing credit mandate run by Mudrick Capital Management. Prior to the redemption, Ellington had $217 million and Mudrick had $199 million as of Dec. 31.
All of the proceeds will be added to the pension fund's $208 million PineBridge Investments high-yield portfolio. Pension fund officials plan to draw down the assets in PineBridge's high-yield portfolio to meet illiquid credit commitments.
Separately, pension fund officials committed up to $100 million to Rockwood Multifamily Partners, a U.S. core-plus open-end multifamily real estate fund managed by Rockwood Capital.
New Mexico PERA also replaced Sarofim Realty Advisors as the managing partner of a $94 million retail and multifamily real estate separately managed account with Rockwood Capital. In January 2017 the board committed $150 million to acquire and/or build retail and multifamily properties, specifically targeting grocery-anchored retail in the U.S. Sarofim had invested about $97 million but the investment period was suspended when a key person legal provision was triggered. Sarofim CEO Scott Fitzgerald could not be immediately reached for comment. Al Galpern had been Sarofim's president and CEO when the pension fund committed to the strategy.
Pension fund officials are also redeeming a $127 million master limited partnership separately managed account managed by Blackstone's Harvest Advisors, and investing the capital in DWS Global Infrastructure Securities, which had $117 million in assets as of Dec. 31, as a lower volatility investment that maintains an exposure to the midstream energy sector.
Separately, the board increased the pension fund's active risk budget to 2.5%, divided between a maximum 2.25% non-actionable risk in alternative investments and 1.25% actionable risk. Before the change, the pension plan had a 1.5% active risk budget that was not divided into actionable and non-actionable risk. The new strategy requires short-term cures for breaches of actionable active risk while avoiding forced selling of illiquid assets to cure breaches, according to an investment committee presentation.
The active risk budget is a planning tool reflecting the board's risk tolerance that helps plan officials monitor and measure whether the active risks they are taking are resulting in excess return, the report said. The board is maintaining its 1% active risk return target.