(August 1, 2012) – New Mexico’s State Investment Council (SIC), a $15.2 billion fund recently rocked by alleged pay-to-play schemes, has a new board, new asset managers and, now, a new return target and asset allocation strategy.
“Sometimes you have to tear down before you can rebuild,” Communications Director Charles Wollmann told aiCIO. “We’re taking some risk out of the equation. Historically, the fund has risen and fallen with the US equity market, and we’re looking to reduce our exposure to that volatility.”
Council members voted to scale down the SIC’s target return from 8.5% to 7.5%, and reduce equity market allocation from 43% to 31% by the year’s end. Fixed-income will also make up less of the portfolio, dropping from the current 20.7% to 16%. Wollmann called this a “very minor reduction,” and said it was based on the feedback from a number of models. Most of the assets pulled from stocks and bonds will be redirected to infrastructure, real estate, energy, and timber. In the longer term, Wollmann said, the SIC may also invest in farmland. The Real return asset class is not represented in SIC’s portfolio at present, but will make up 10% by 2013. Real estate holdings will increase from 6% to 10% of assets.
This new investment strategy follows over a year of intensive house cleaning at New Mexico’s SIC, according to Wollmann. “A new council came in, looked at our external asset managers and found some were not institutional quality.” The fund is pursuing litigation against 17 former placement agents, hoping to recoup fees and losses the fund attributes to extensive pay-to-play schemes. And they’re pursuing it aggressively.
“We caught one person, Marc Correra, who had fled to France. And we served him in the lobby of his Paris apartment,” Wollmann said. Fraudsters, take note.