New York Increases Alternative Assets Allocations for Public Pension Funds

New York State and New York City pensions funds can now increase the allocations they make to alternative assets, including hedge funds and private equity funds, following the signing of a new bill by Governor Kathy Hochul.

The New York State Legislature approved the bill in June.

The bill raises the cap on alternative assets, which includes private real estate and direct loans to companies, as well as foreign stocks, to 35% from 25%. The increase applies to the $233bn New York State Common Retirement Fund as well as five New York City pensions with more than $230bn in combined assets.

It’s the first time since 2006 that the so-called “basket clause,” a provision in state law that sets the cap, has been adjusted.

Despite the market turbulence this year, US public pension funds have continued to maintain a high allocation to alternative assets, particularly real estate, and are expected to continue to allocate significant capital to the sector next year.

The New York Common Retirement Fund, for example, committed nearly $1.3bn during September, more than half of which was earmarked for real estate investments, according to the fund’s monthly transaction report.

The pension fund committed $300mn to the Bridge Workforce and Affordable Housing Fund II managed by Bridge Investment Group.

Another $300mn was allocated to the LaSalle Property Fund from LaSalle Investment Management, which is an open-ended fund structure focused on acquiring and managing a diversified portfolio of core real estate.

Meanwhile, the $67bn Pennsylvania Public School Employees Retirement Board recently committed to two private real estate funds totaling $265mn. And the State of Wisconsin Investment Board (SWIB) approved an approximately $7bn expansion of private market investments in 2023.