NY State Common sets up $200m SME credit fund

The $184 billion pension fund has created a $200 million credit programme for small businesses in the state. Hamilton Lane, which already runs an in-state private equity program with the pension fund, will advise on deals, while several banks will provide leverage.

The New York State Common Retirement Fund has established New York Credit Small Business Investment Company (SBIC), a $200 million fund which will provide credit to small businesses in the state. NY State has put $50 million into the fund with the balance drawn from bank loans.

SBICs are regulated entities under the auspices of the US Small Business Administration (SBA) and benefit from cheap leverage to boost the capital available to support lending to small businesses.  

The $184.5 billion state pension fund—the third largest in the US—is one of a small number of US pension funds to offer direct in-state credit financing. The State of Wisconsin Investment Board (WSIB) runs a similar venture and has been expanding it to companies outside the state. 

The new fund will be managed by private markets institutional consulting firm Hamilton Lane. The fund also has a number of banks, including TD Bank, Bank of New York Mellon, HSBC, Deutsche Bank and First Niagara Bank, as investors.  

The SBIC fund will provide capital to businesses implementing growth strategies, expanding operations or transitioning ownership, said a statement from the retirement fund. The programme will target New York companies with revenue between $5 million and $50 million.  

New York’s state pension fund already runs a private equity investment program for local companies in partnership with Hamilton Lane. The advisory firm has been consulting for the pension on private equity for a number of years and has invested in 27 companies on behalf of New York State through the private equity investment programme. 

“The state pension fund is helping New York’s growing businesses move to the next level,” said State comptroller Thomas DiNapoli, who oversees the pension fund. “By working with Hamilton Lane, we’ve joined with five major banks to bridge the gap between New York’s companies and the financing they need to excel. These investments are in line with our priority of generating returns for the pension fund, while helping to boost our state’s economy,” he added.

The in-state credit programme will partner with private equity sponsors investing in New York-based companies. As of June 2015, the equity investment platform had invested $820 million in 310 companies and achieved $322 million in returns for the pension.

The state pension fund also provides loans to local companies through its New York Business Development Company, which makes working capital, equipment or real estate loans to New York small businesses. To date, NY Common has lent $362 million to 1,082 small businesses in the state, with $50 million available in remaining funds. 

Hamilton Lane is an independent alternative investment consulting and management firm providing private markets services to institutional investors globally. The firm has $239 billion in assets under management and advisement.