New Mexico State Investment Council, Santa Fe, on Nov. 22 committed up to a total of $460 million to six alternative investment funds.
The $38.5 billion endowment committed up to $150 million to Strategic Value Capital Solutions Fund II, a global distressed situations fund investing mainly in the U.S. and Europe. This commitment is the council's second with Strategic Value Partners, having committed $100 million to Strategic Value Special Situations Fund V in 2020.
The council also committed up to $100 million to Bell Value-Add Fund VIII, a U.S. multifamily real estate fund managed by Bell Partners. This is the council's second commitment to Bell, after committing up to $75 million to Bell Institutional Fund VII in 2020. The commitment to the new Bell fund puts the council close to double its planned commitment pace of $664 million to vintage 2022 non-core real estate funds, said Seth Marcus, a partner at the council's real estate consultant, The Townsend Group.
He said New Mexico SIC was surpassing its planned non-core real estate commitment pace due to the "attractive set of managers raising money this year" and the quality opportunity set. What's more, the overcommitment does not cause "compliance concerns" because the council could reduce future commitments, Mr. Marcus said.
New Mexico SIC also committed up to $100 million to Frontier Fund I, the first fund of new venture capital firm America's Frontier Fund. The fund will create a venture studio in New Mexico to focus on sourcing technologies from research institutions in the state and creating new startup companies that can raise additional capital from the fund as well as other funds.
The council committed up to $75 million to Arlington Capital Partners VI, a middle-market buyout fund that would invest in sectors including aerospace and defense, government services and technology, health care, and business services and software sectors in the U.S. Arlington Capital Partners is a new general partner for the council.
The council also committed a total of up to $35 million to Crosslink Capital, made of up to $20 million to Crosslink Ventures X, the latest flagship early stage venture capital fund, and up to $15 million to Crosslink Endeavour II, a early growth fund.
The new commitments are New Mexico SIC's third commitment to Crosslink's early-stage flagship fund series and its first commitment to the Endeavour fund series.
Separately, during the meeting Chief Investment Officer Vince Smith reported that the record amount of contributions received by the endowments the council oversees are being invested in bonds and cash. Steve Moise, state investment officer, had said at the council's Oct. 25 meeting that staff expects $2.6 billion in oil and gas royalty contributions for the $24.9 billion Land Grant Permanent Fund by the end of 2022, a new record high, up from $1.3 billion in 2021.
"We're certainly willing to talk about that strategy," Mr. Smith said.
But it is difficult to invest in private assets quickly because it takes time for the capital committed to be called, he said.
Mr. Smith said that staff thinks that it is best hold the capital in bonds and cash to stay liquid and "not invest in risk assets quite yet," in light of the Federal Reserve expected to continue increasing interest rates and a looming recession that investment staff expect to hit in the fourth quarter or the first quarter of 2023, Mr. Smith said.