NEW YORK- As pensions in the New York City system get set to become some of the largest investors in private equity in the next several years, they are considering adding gatekeepers and internal professionals to help manage their private equity programs.
The four city pensions that invest in private equity – New York City Teachers’ Retirement System, New York City Employees’ Retirement System, New York City Police Pension Fund and the New York City Fire Pension Fund – currently have more than $85 billion under management and have just begun to commit capital to private equity. To date, the four groups have committed only about $300 million to the asset class.
The pensions plan to commit at least $2 billion to private equity, said Chief Investment Officer Donna Anderson. The pensions are not under a deadline to commit the capital, she added.
In the last two years, four of the five pensions that comprise the city system approved investing 2% of their assets in private equity. The fifth, the New York City Board of Education Retirement System, has only $1.6 billion under management and will not make an allocation to the asset class for at least the next several months, Ms. Anderson said.
The pensions will consider hiring a manager to help review private equity funds as the program matures. For now, Ms. Anderson is handling the investments, reporting to the deputy comptroller of the city pensions.
At the same time, the second largest of the city’s five pensions, the $24 billion teachers’ pension, is considering hiring a gatekeeper to assist in managing its fledgling program, Ms. Anderson said.
As of today, the teachers’ pension has yet to commit any capital to private equity, although it approved its $480 million allocation last summer.
The employees’, police and fire pensions already have hired Pacific Corporate Group as their non-discretionary adviser. The target approved by the four pensions for private equity represents $1.70 billion in invested capital, giving the pensions the ability to commit more than $3 billion to the asset class to achieve its investment goal.
The pensions are taking a conservative approach to the asset class, however. “Our particular focus is on funds with a strong management team because we’re going at this in a slow, deliberate way. We are looking for partners who have been together and have a consistent strategy,” Ms. Anderson said, adding the pensions will consider investing in United States funds of all sizes.
The pensions to date have committed $125 million to Cypress Merchant Banking Partners II, L.P., $100 million to FdG Capital Partners, L.L.C. (a firm that invests capital for families in New York City), and $80 million to VS&A Communications Partners III, L.P.