The $268 billion New York State Common Retirement Fund’s (NYSCRF) allocation to alternative investments continues to be an important part of its investment strategy, as evidenced by its placement of $1.9 billion in new commitments — including a whopping $1.1 billion allocation to the credit class — at the close of its fiscal second quarter in September.
Although NYSCRF’s second quarter investment returns retreated from their heights earlier in the year, the fund remains on pace to generate solid returns overall, according to New York State Comptroller Thomas DiNapoli, in a released statement. NYSCRF delivered an estimated 1.15% return in the second quarter of its fiscal year 2021-22, representing the three-month period ending Sept. 30, 2021. In its first quarter (the three-month period ending June 30, 2021) NYSCRF delivered a 5.82% return.
NYSCRF’s fiscal year ends March 31.
NYSCRF’s new commitments to various alternatives strategies in September were led by a $1.1 billion allocation to credit. Francisco Partners’ Francisco Partners Credit Partners II, L.P. was awarded $250 million. The fund will seek to originate proprietary credit investments focusing primarily on middle-market companies within healthcare IT, financial technology, security, communications, infrastructure software, education, and application software in North America.
Two Blackstone funds secured commitments totaling $375 million. The firm’s Capital Opportunities Fund IV LP received $250 million, while its COF IV Co-Investment Fund LP was granted $125 million. The Blackstone funds will primarily extend loan packages to performing companies in the upper/middle-market. And Strategic Value Excelsior, L.P. took home $500 million. The closed-ended fund is focused on distressed and special situations investments primarily across North America and Europe.
The real estate class was the runner up recipient of NYCRF’s alternatives largess; The fund funneled $400 million into the class. Brookfield Asset Management’s Brookfield Strategic Real Estate Partners IV received $400 million. The closed-end, diversified, opportunistic fund invests in large-scale transactions that possess multiple opportunities to create value. NYSCRF also funded approximately $1.2 million in mortgages under a buy-sell agreement with The Community Preservation Corporation.
Private equity received $315 million. NYSCRF awarded $10 million to NFX Capital Fund III through the Hamilton Lane/NYSCRF Israel Fund, L.P. The fund will seek early-stage investments across the technology and life science sectors in the U.S. and Israel.
And Providence Equity’s Providence Strategic Growth V, L.P. received a $95 million commitment. Providence will pursue investments in software and technology enabled services primarily in North America. Asia Alternative’s New York Balanced Pool Asia Investors IV, L.P. was handed a $210 million commitment. The balanced pool provides pro-rata pan-Asia exposure to Asia Alternatives main fund investments.
NYSCRF made a small ($15 million) additional commitment to its emerging manager program (the retirement fund has approximately $9 billion allocated to the program). Brasa Credit II, L.P. received the commitment, which was made through the Empire GCM RE Anchor Fund, L.P. The fund is a programmatic joint venture focused on originating senior and mezzanine debt and preferred equity, backed by commercial real estate.
As of Sept. 30, 2021, NYSCRF had 52.14% of its assets invested in publicly traded equities (versus 53.68% in its Q1). The remaining assets by allocation are invested in cash, bonds, and mortgages 21.84%, (versus 21.96% in Q1); private equity 12.23% (versus 11.21% in Q1); real estate and real assets 8.44% (versus 7.96% in Q1); and credit, absolute return strategies and opportunistic alternatives 5.35% (versus 5.19% in Q1).