New York State Teachers Pulls Back on PE, Real Estate in ’23, Eyes Infrastructure for First Time

By David G. Barry

The New York State Teachers’ Retirement System (NYSTRS) is planning to reduce its private equity and real estate investing in 2023, while looking to add infrastructure to its portfolio for the first time.
The $123.1 billion system will seek to commit $2 billion to private equity next year, said Heidi Brennan, a NYSTRS’ spokesperson. NYSTRS had earlier this year said it would look to commit $2.4 billion into the asset class. NYSTRS had invested $1.4 billion in the sector as of June 30, but $2.3 billion in 2021, $2.4 billion in 2020 and $2.5 billion in 2019.
The pacing plan is aimed at helping NYSTRS reach its allocation target over the next five years. It was upped to 9% from 8% earlier this year. NYSTRS’ private equity allocation is currently at 11.3%.
On the real estate side, NYSTRS’ pacing for equity commitments is $495 million to $750 million in 2023, down from the $1.6 billion to $2.1 billion it had targeted for 2022. Real estate debt, meanwhile, would go from $1.3 billion to $1.4 billion in 2022 to $350 million to $750 million in 2023.
NYSTRS is currently also overallocated to both real estate equity and debt. It has an actual allocation of 13.2% to real estate equity on September 30 against an 11% target. Its real estate debt allocation was 6.5%, above its 6% target.
NYSTRS is currently prohibited by New York State Law to have more than 25% of its assets in alternatives. Private equity and real estate equity now account for 24.5%. Legislation was approved earlier this year to up that number to 35% but is awaiting the signature of Gov. Kathy Hochul. She has until the end of the year to sign bills.
For the first six months of 2022, real estate equity was up 15%, while private equity showed an increase of 4.6%. Real estate debt was down a negative 2.8%.
In a presentation to the NYSTRS board on the system’s real estate equity and debt programs, consultant Callan said that infrastructure equity and debt strategies are being evaluated and that due diligence on an infrastructure debt fund is underway.
Brennan confirmed that NYSTRS has not made any infrastructure investments in the past and that any made would be part of the real estate allocation.
Callan did not say in its report how much NYSTRS is looking to invest in infrastructure.