By David G. Barry
Coming off a difficult
quarter, the New York State Teachers’ Retirement System (NYSTRS) tweaked its asset allocation targets.
Following a plan proposed by consultant Callan, NYSTRS’ upped its private
equity target to 9% from 8% and lowered its international equity target to 15%
from 16%. The move brings NYSTRS closer to its actual private equity
allocation figure – which was 9.9% as of Dec. 31.
According to data from another consultant, StepStone Group, NYSTRS’
private equity portfolio produced a total net internal rate of return of 35.9% in
2021. As of June 30, the PE portfolio was valued at $14.6 billion, down
slightly from $14.7 billion as of June 30.
The plan was reviewed and voted on by NYSTRS’ Investment Committee on
Aug. 3.
Within the private equity portfolio, StepStone also suggested a pacing plan of
$2 billion annually to get it closer to its allocation target over the next
five years. In 2021, it allocated $2.3 billion. In 2020, it was $2.4 billion
and in 2019, it was $2.5 billion. So far in 2022, it has allocated $1.4
billion.
StepStone also suggested another slight tweak, decreasing the target to venture
capital/growth equity to 10% from 15% and increasing the target of “other” to 10%
from 5%. Other included secondaries and co-investments. In fact, StepStone suggested
to NYSTRS that it explore the use of direct co-investments with existing
managers to selectively gain additional exposure to underlying investments
while helping to reduce overall economics. The suggestion echoes the moves that
are being done/contemplated by such other large public pension funds as
California State Public Employees’ Retirement System (CalPERS) and California
State Teachers’ Retirement System (CalSTRS).
NYSTRS’ asset
allocation tweak comes off a quarter in which it saw its asset under management
drop from $145.5 billion at the end of March to $130.4 billion at the end of
June, a more than 10% decline. Over the past year, it has seen a decline of
$15.9 billion.
The plan said it generated $2.4 billion of net income and received
contributions from members of $1.7 billion but paid out $8.08 billion in
benefits and had investment losses of $12 billion.
As of June 30, 2021, NYSTRS said its estimated
funded ratio using the actual value of assets was 99%.