By Muskan Arora
The New Mexico State Investment
Council unveiled its real estate, private equity and infrastructure investment
plans for FY2025, alongside new commitments.
Private equity
The staff and consultant Mercer have
set a pacing plan of $1.5bn to achieve the targets for its National Private
Equity Program over the intermediate term.
NMSIC allocates 8.62% to its private equity
portfolio, which amounts to $45.1bn.
The new pacing will assist the system to hike
“our co-investment activity through a combination of an SMA with our private
equity consultant Mercer and side-by-side co-investment vehicles with our GPs” in
2025.
The PE portfolio produced a new IRR of 6.4%
for 12 months through December 2023, which was slightly higher than the 5.5% 1-year
return of the Burgiss Global Private Equity Index.
Making moves towards the long-term target, the
system allocated $100m to American Securities Partners IX, with a $100m
commitment to an additional co-investment sidecar. The fund focuses on industrials,
business services and essential services.
NMSIC committed another $65m to Builders
VC Fund III, which invests in TMT venture capital opportunities in the US.
Lastly, the system committed $15m to TK MediaTech Ventures, which particularly targets TMT opportunities in media and entertainment industry.
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Infrastructure
The sovereign wealth fund allocates to its
infrastructure portfolio within its real return sleeve. The pacing for the real
return sleeve is set at more than $800m
“Volatility, periodic poor returns, and
uncertainty related to the path and timing of the energy transition have
combined to effectively starve the US oil and gas value chain of capital,” as stated
in the meeting documents.
“It is expected that this capital flight
will present interesting opportunities for investors willing to consider the
sector,” as per the recent meeting documents.
At the same time, allocators are also keen
in the renewable sector as corporate and government mandates push for
development of clean energy sources. This has opened up opportunities in the supporting/enabling
technology such as battery storage and power distribution infrastructure.
In the coming year, NMSIC will focus on
making new commitments to traditional and energy transition focused
infrastructure while exposure to conventional energy, particularly in the
upstream portion of the value chain, will likely decline.
The system will seek to build positions in
areas where the portfolio is under-represented including
communications-oriented infrastructure including towers, fiber, spectrum, and
non-US data centers.
Lastly, additional investments in
agriculture, timber, metal/mining/non-energy mineral will be considered.
Real Estate
NMSIC sets a pacing of $1bn for its real
estate sleeve to reach the long-term target allocation of 12%.
The system seeks to narrow its core and
core-plus strategies, only to broaden the non-core strategy to 60% from 40%. The
core component represents 63% of the total portfolio against a neutral point of
range at 55%.
NMSIC expects to maintain under-weight
positions in conventional retail and office and to over-weight industrial while
seeking to increase exposure to multifamily.
For the year ending December 31, 2023, 10
new non-core commitments of approximately $1.02bn were made.
As of July 31, NMSIC had a 7.38 percent actual allocation to real estate, against a 12 percent long-term target.