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New York Common sets aside $200m for ‘toxic assets’

The $126bn pension has created a new allocation to house its investments in the US Public Private Investment Programme.

The New York State Common Retirement Fund has earmarked $200 million to invest with managers that have qualified for the US government’s programme to unfreeze the credit markets and take bad assets off banks’ balance sheets.

New York Common, which reported assets of $126 billion at the end of May, has not yet selected a manager or managers with whom to commit its money, but the comptroller, Thomas DiNapoli, has approved the allocation of the capital.

“This is an opportunity for us to get into some of the distressed mortgage-backed securities and be constructive in the economy,” a spokesperson for the pension told PEO. “There is a promising upside to some of the distressed securities that will be available through the programme, with financing at low cost.”

The Public-Private Investment Programme is intended to take bad assets – most of which are mortgage-related – off of banks’ balance sheets. The programme was originally envisioned to generate $1 trillion of buying power to reinvigorate the frozen credit markets, but the plan has been scaled back and looks likely to create about $40 billion.

Several investment firms have qualified to take part in the PPIP programme, which means they must raise at least $500 million for the programme.

The total purchasing power of the programme has reached $16.36 billion. Seven managers have raised about $4.09 billion, which has been matched 100 percent by the US government, creating $8.18 billion to invest. The US Treasury also has provided $8.18 billion of debt, ramping up the available pool of capital for investments to $16.36 billion.

Firms that have met the $500 million threshold so far include AllianceBernstein, with its sub-advisors Greenfield Partners and Rialto Capital Management; BlackRock; Wellington Management; Invesco; TCW Group and RLJ Western Asset Management.

Other firms that pre-qualified to take part in the programme include Oaktree Capital Management, Marathon Asset Management and a partnership between Angelo Gordon and GE Capital Real Estate. Those firms are expected to reach the minimum capital-raising threshold soon, the Treasury said in a statement.

New York State will house its commitment to PPIP managers in a new allocation it has created. The new allocation will be within the pension’s 25 percent alternatives allocation, with a range of up to 5 percent. New York Common has about a 20 percent actual allocation to alternatives, which includes private equity and real estate.

The new allocation will hold investments like PPIP, real assets including timber and gold and infrastructure – assets for which the pension has never had a space in which to store them.