NYC Employees’ Retirement shifts focus to secondaries

Liquidity from the system’s PE portfolio dropped off over the past two years.

New York City Employees’ Retirement System committed $200 million to secondaries funds in the second and third quarters of last year.

New secondaries funds have had a banner year, setting a record for the amount of capital raised through the first three quarters of 2023. LP interest has grown as institutional investors seek ways to generate liquidity from their private equity portfolios.

NYC Employees’ commitments were detailed in a quarterly report of its private equity portfolio included in board documents for its 20 December investment committee meeting. Affiliate title Buyouts reviewed the report.

The system placed a $69.2 million commitment to Ardian‘s ASF IX fund and $103.8 million to a connected co-investment opportunity in April, according to a presentation from consultant StepStone. NYC Employees also committed $18 million to New 2ND Capital‘s Fund III and $9 million to its sidecar vehicle.

According to the presentation, NYC Employees committed a total of $578 million to private equity funds in the second and third quarters of last year – meaning 35 percent of its commitments during the time period went to secondaries funds.

Secondaries comprise 6 percent of the system’s $17.1 billion private equity portfolio, according to the presentation.

The system’s recent cashflow trends is illustrative of the challenges many institutions are facing around dwindling distributions from a sluggish exit environment.

According to the presentation, distributions outpaced contributions every year between 2012 and 2021, resulting in the system almost reaching self-funding status.

As of the end of June, contributions outpaced distributions by $437 million – a drop that reflects how the slowed exit market has impacted many LPs.

The $80.5 billion NYC Employees’ system recently hiked its target allocation to private equity to 10 percent from 8 percent. Private equity currently comprises 10.9 percent of the total fund, according to the NYC Bureau of Asset Management.