By Muskan Arora
The $148.8bn New York State Teachers’
Retirement System will retain StepStone as its private equity and private debt
consultant for another year, effective February 1.
Further, the pension plan disclosed it is interviewing
candidates for the position of assistant directors and directors.
Within the real estate portfolio,
the consultant recommended a net pacing of $1.0bn to $1.2bn for Real
Estate Equity (public and private) and a net pacing of $1.1bn to $1.3bn for
Real Estate Debt (public and private).
Stepstone
recommended a general target of 65% core and 35% non-core allocations with a
cap of 45% for non-core which remains in line with the previous recommendation
from Callan.
The pension plan has an exposure of 68% to core and 32% to non-core as of March 31, 2024.
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“Consider first mortgage loans on quality office buildings with long term credit tenant leases which may provide higher yields relative to the System's focus on multifamily, industrial and neighborhood shopping centers,” stated the consultant in the recent meeting materials.
David C. Gillan, head of real estate, noted
that stalled market transactions from the past 18 months have begun to open
over the third quarter.
During the third quarter, the system made a
$90m allocation to first mortgage on a stabilized multifamily asset in San
Diego, California.
The system is keen on data centers, digital
infrastructure and opportunistic strategies with managers who have a track
record of “capitalizing on distress.”
The RE team is actively “reviewing
multifamily, industrial, and neighborhood shopping center opportunities in
locations with strong, diverse long term demand profiles.”
Further, Gerald J. Yahoudy II, managing
director of private equity signaled exploring additional relationships
within opportunistic credit for “diversification purposes”.
“Private credit continues to be the
dominate source for buyouts and M&A. However, recent bank lending activity
has had an impact on lending terms,” as per the meeting materials.
The system committed $150m to Tenex Capital
Partners IV and $200m to Linden Capital Partners VI, during the quarter ended
September 30.
The quarterly underperformance of the
externally managed public equity sleeve has pushed Paul Cummins, managing
director of public equity at NYSTRS to propose bringing back $1bn of passive
assets in-house.
“Internal management would reduce manager
concentration, provide NYSTRS with operational benefits, and further enhance
staff’s expertise and capabilities,” stated the meeting materials.
To mitigate risk around the complex
international markets, staff proposed a “multi-year implementation timeline”
with around $170m of externally managed passive Canadian and US securities
before including other countries.
