NYC pension system finalizes $3bn account with KKR

The city’s five pension funds had a total of $186.97bn in assets as of August.

New York City’s public pension funds and KKR have closed a partnership on a $3 billion separately managed account, PERE‘s sister publication, Private Debt Investor, reported Tuesday.

The five city pension funds will invest the money across private equity, infrastructure, real estate and credit  with the New York-based asset manager, a deal the two parties reportedly began negotiating earlier this year.

The Office of the City Comptroller, which oversees the systems, declined to comment. KKR did not respond to a request to comment.

Such partnerships with LPs are a priority for the KKR, supplementing its long-term fund capital and permanent capital like public real estate investment trust or business development corporation, Scott Nuttall, co-president and co-chief operating officer at the firm, said on the third quarter earnings call this week.

KKR already has an account with the Teacher Retirement System of Texas. Earlier this year Bloomberg also reported reported the firm was working on a partnership with Aflac, the insurer. Private Equity News first reported that the deal with the New York pension funds had been secured.

KKR did not provide any details on the $3 billion account or any other partnerships on the call, but executives did note that the firm had closed two new partnerships and upsized an existing partnership over the third quarter, totaling more than $7 billion. These separate accounts are typically 20-30 years in length and include a recycling provision to re-invest earnings.

Nuttall added that investor interest in these vehicles is driven by institutions “beginning to act out some of the themes we’ve been hearing from them the last few years,” namely that they over-diversified their portfolios during the last cycle and “they’re trying to figure out how to do more with fewer partners”.

“They’re just basically acting on that view that they have a lot of capital, a small amount of staff, and desire to partner closely with firms like ours to basically be an extension of their team on a global basis in a long-term structure.”

The New York City pension funds had a combined total of $186.97 billion as of August, according to the systems’ website. The retirement plans in the system include the New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York, the New York City Police Pension Fund, the New York City Fire Department Pension Fund and the New York City Board of Education Retirement System.