Real estate weighs down NY Common returns

The US’ third largest public pension generated overall returns of 25.9% in the year to the end of March – however real estate was the only loss-maker, returning -27.8%.

Real estate investments made by the New York State Common Retirement Fund continue to post negative returns for the pension – recording a 27.8 percent loss over the past year.

The $130 billion public pension generated overall returns of almost 25 percent for its entire portfolio in the 12 months to the end of March – however real estate still lags behind returning -27.8 percent over the same period.

The returns have improved over the past year, after the real estate asset class returned -32.6 percent in the year to the end of March 2009. Property investments accounted for roughly 6.5 percent of New York Common’s fund, at the time.

We’re not all the way back yet, and as we’ve seen in recent weeks, there are still challenges in the marketplace. But our foundation is strong.

New York State Comptroller
Thomas DiNapoli

New York State Comptroller Thomas DiNapoli said in a statement the pension had come through “one of the toughest recessions in modern times” and was benefitting “from the national economic recovery we hope is taking hold”.

However, he added: “We’re not all the way back yet, and as we’ve seen in recent weeks, there are still challenges in the marketplace. But our foundation is strong. We’re moving in the right direction.”

New York Common’s private equity portfolio returned 11.6 percent in the 12 months to the end of March this year; compared to 14.9 percent for absolute return strategies and 51.7 percent and 51.8 percent for domestic and international public equities, respectively.

Private equity returned -22.2 percent in the year to the end of March 2009, according to the pension's annual report. At the time the asset class accounted for
9.7 percent of the fund's portfolio.

The US’ third largest public pension has not made a new commitment to a private equity real estate fund since last April, when it committed $30 million to Mountgrange Investment Management’s Real Estate Opportunity Fund I, through the captive fund of funds Lake Montauk Real Estate Fund, which is managed by Franklin Templeton Real Estate Advisors. Mountgrange closed the vehicle last May on £300 million of commitments.

In the past year, New York Common has invested primarily in first mortgages for affordable housing in the state, either directly or through the Community Preservation Corporation, which sells permanent mortgage loans to the pension. The pension said on its website it had acquired more than $334.7 million of first mortgages since 1992, providing “long-term financing for over 9,862 affordable units in New York state” .