New Mexico Revises Interim Private Equity and Fixed Income Targets

By Muskan Arora

New Mexico State Investment Council, in the recent board meeting, approved the interim target changes for their private equity and core fixed income portfolio.

The $53 billion system will increase their core fixed income targets from 9% to 14%, which would a 5% reallocation from its private equity sleeve.

In the recent meeting, the board agreed to reduce their private equity target from 12% to 7%, while reducing the lower range to 4% from 7% and upper range to 10% from 17%.

“We set these interims targets along with several other funds back in June last year because we were making so many changes and wanted to suspend upper and lower limits for core fixed income which were approved by the board then,” said the state investment team in the recent board meeting.

“However, we are still pretty low on private equity as compared to its interim target which is mostly because of the inflows to the severance tax permanent fund last year,” added the team.

According to the meeting materials, subsequent large inflows into the fund alongside expectations to get the allocations within the rebalancing ranges in private assets, especially private equity sleeve over the last few months have ignited this change.

Looking at the current allocation of 3.4% of the private equity sleeve, the investment team believes 12% is “extremely aggressive” and lowering the target to 7% would make “it possible to get there”.

“We have so much capital come in and we knew it was going to cash and fixed income, and we just could not get it in private assets that quick,” said the team.

The private equity portfolio sits at 3.4% and the fixed income portfolio is at 21.2%, as of February 2024.

The Core Fixed income manager roster includes BlackRock Core Bonds and PIMCO among others.

The private equity sleeve consists of buyout, growth equity, special situations and venture capital.

The recommendation was presented by Robert “Vince” Smith, Chief Investment Officer, Jon Clark, State Investment Officer and deputy State Investment Officer.