New York pension backs RE funds of funds

The New York State Common Retirement Fund committed $300m to a fund managed by Franklin Templeton Real Estate. It came as the state’s comptroller called for more flexibility in potentially increasing alternative investments.

The New York State Common Retirement Fund (CRF), the third-largest pension fund in the US, invested $300 million in a captive fund of funds managed by Franklin Templeton Real Estate Advisors.

The commitment to Lake Montauk Real Estate Fund targets real estate opportunity funds.

It came as CRF committed a further $550 million to three other funds of funds in January. The pension committed $250 million to NYSCRF Pioneer Opportunities Fund I, managed by Parish Capital Advisors. Parish also manages NYSCRF Pioneer Partnership Fund I, which received $100 million from CRF, while NYSCRF Pioneer Partnership Fund A, managed by Bank of America’s Capital Access Funds, got a $200 million commitment.

All three investments were the first for CRF in these funds, while no placement agents or intermediaries were used in the transactions. The pension made the commitments as part of its emerging manager private equity programme, which targets funds with assets under management below $750 million, as well as funds owned by women and minorities.

CRF’s private equity investments accounted for 6.5 percent of its portfolio at the end of the last fiscal year, while real estate accounted for 4.4 percent. The pension’s investments in both areas have outperformed the stock market during the current recession, but are nearing their target allocation limits of 8 percent and 6 percent respectively.

In early February, New York Comptroller Thomas DiNapoli said in an address to union representatives that the fund had lost 20 percent of its value, and called for more flexibility in committing funds to investment vehicles other than stocks. DiNapoli has in the past urged regulators to lift the 25 percent cap on the pension’s alternatives allocation.