New Mexico has suspended alternatives investing by its $11.8 billion oil and gas endowment while the endowment reviews investments recommended by embattled Aldus Equity, which is caught up in a kick-back scandal that has shaken the private equity and placement agent industries.
Recommended commitments to private equity funds awaiting final approval from the New Mexico State Investment Council will have to go through the “vetting” process again, a spokesman for the SIC said. Recommended commitments include $30 million each to Landmark Equity Partners XIV, Newstone Capital Partners II and VSS Structured Capital Partners II, and $50 million to Ares Corporate Opportunity Fund III.
New Mexico SIC isn’t abandoning private equity for good, the state’s governor, Bill Richardson, said in a statement.
“Private equity is a critical asset class, and under existing circumstances, we feel it appropriate to forge ahead,” Richardson said. The ban includes real estate investments.
New Mexico SIC has been investing in private equity since 1989. The endowment’s long-term target range for private equity is 9 percent to 12 percent. SIC’s actual allocation to private equity stood at 11.6 percent as of 31 December 2008.
The endowment will use its overall portfolio advisor, New England Pension Consultants, while it searches for a new private equity consultant.
Saul Meyer, founding partner of Aldus, was indicted by New York’s Attorney General Thursday for participating in an illegal scheme to pay sham finder’s fees to a former state political operative in exchange for business with the $122 billion New York State Common Retirement Fund.
The US Securities and Exchange Commission also filed civil charges against Meyer and Aldus Thursday.
Aldus worked as the private equity consultant for the New Mexico State Investment Council, which manages the state’s oil and gas endowment, since 2004. Governor Richardson ordered SIC and the teachers’ pension to fire the firm on Wednesday.
New Mexico has been reviewing investments recommended by Aldus since the New York investigation came to light in March. The SIC discovered The Carlyle Group and Quadrangle Group used a firm affiliated with Morris, Searle, to secure investments of $20 million each from SIC. The endowment made the Carlyle investment in 2005 and allocated $20 million to Quadrangle in 2004.
On Thursday, Richardson decided to ban all placement agents from involvement with investments with the SIC. He also established a six-month ban on placement agent involvement with the state’s Education Retirement Board.
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