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A Step-by-Step Guide to Accessing Emerging Manager Programs at Public Pensions

By: Steve Aitken, Vice President, Institutional Sales

It’s never easy launching a new strategy at a new firm, especially when approaching potential allocators.

It can be overwhelming knowing who to call, doing the outreach, and following up.
This is why we wanted to provide some insights on the Public Pension channel that can be a great resource to help launch your strategy.

Pensions have increasingly grown their allocations over the years, and not only help younger firms and managers, but it is really in hope to find future managers they can trust for a long time to come.

So, with that being said, it’s important to have the “road map” on how to navigate these larger pensions with Emerging Manager programs that can be daunting at first glance.

In this case, we would like to provide you the “road map” to the two largest pensions in New York: New York City Comptroller’s Office and New York State Common Fund. Every pension defines an Emerging Manager differently, even within their own program by asset class. So in this article, you will find the following:

  • How is their Emerging Manager Program organized?
  • Is my strategy a fit based off of Firm AUM or Fund AUM, vintage, etc?
  • Who are the consultants that cover my respective asset class (if any)?

Although your strategy might seem like a fit at first glance, it can be a long, grueling process to eventually get the winning ticket. The Due Diligence process can be time consuming and intense, but establishing that relationship and persistence is key. 

By the end of this article, you'll have a clear understanding of the New York public pension Emerging Manager programs, as well as their requirements.

New York City Comptroller Office

The NYC Comptroller Office manages five different pensions for the city (Teacher Retirement System, Employees Retirement System, Police, Fire, and Board of Education), so we are laying out the consultants for each asset class per pension because the boards pick different consultants for different asset classes. Also, each asset class defines emerging manager differently, so this is a good example of not all Emerging Manager programs are created equal.

Public Markets:

  • TRS - Rocaton
  • NYCERS - Callan
  • POLICE - Wilshire
  • FIRE - New England Pension Consultant
  • BERS - Segal Marco

Criteria:

  • Managers are generally limited to under $2 billion of firm-wide assets under management at time of initial funding.

Private Equity:

  • TRS - Hamilton Lane
  • NYCERS - StepStone
  • POLICE - StepStone
  • FIRE - StepStone
  • BERS - N/A

Criteria:

  • Primarily Funds I – III, raising up to $1 billion with a broad institutional investor base.
  • Buyout, growth equity, and distressed/special situations investment strategies.
  • Firms with institutional-quality middle and back offices and strong operational controls.

Real Estate:

  • TRS - Courtland (StepStone)
  • NYCERS - Courtland (StepStone)
  • POLICE - Townsend
  • FIRE - Townsend
  • BERS - Courtland (StepStone)

Criteria:

  • Firms with less than $2 billion in total assets under management.
  • Currently raising first, second, or third institutional real estate fund.
  • Currently targeting fund size of $500 million or less.

Opportunistic Fixed Income:

  • TRS - Rocaton
  • NYCERS - Callan
  • POLICE - Wilshire
  • FIRE - New England Pension
  • BERS - Segal Marco

This sleeve is looking at long-biased, alternative credit investment strategies such as direct lending, special situations, distressed, commercial real estate debt and structured credit.

Criteria:

  • Firms that are currently fundraising between $500 million and $2 billion.
  • Have a broad institutional investor base.
  • Employ complementary strategies to the existing portfolio.

Hedge Funds: Not as large as the other programs but still important to note.

  • TRS - N/A
  • NYCERS - N/A
  • POLICE - Aksia
  • FIRE - Aksia
  • BERS - N/A

Criteria:

  • Firms with less than $1 billion in assets under management and/or less than a 3-year track record at time of funding.
  • Discretionary and systematic macro, commodities, credit, long/short equity, event driven, tactical trading, relative value strategies and focus on low net exposure funds.

New York State Common Fund

The pension defines emerging managers by stages of their life cycle as a firm, and there is different coverage depending on that stage that we wanted to lay out for you and your firm.

It’s also worth noting that in addition to their Emerging Manager program, they also have a Minority and Women Owned Business Enterprise Program that manages over $20B. The criteria here is pretty much firms that are majority owned by women or minority managers that have established a trackable track record, and have their operations sound. This has been a huge emphasis for New York, and will be moving forward.

Public Equities:

  • Global Equity: Xponance (previously FIS Group)
  • US Small Cap: Leading Edge Investment Advisors
  • US Mid Cap, Global Equity: RockCreek

Criteria:

  • Early & Mid-Stage:
    • Structure: Separate Managed Account
    • Managed by: Program Partners Firm
    • AUM typically less than $500 million (early) and $2 billion (mid) at the time of commitment. Sample commitment: $50 million to $100 million.
  • Late-Stage:
    • Structure: Separate Managed Account
    • Managed by: NYSCRF Direct, Program Partners Firm
    • AUM typically less than $3.5 billion at the time of commitment
    • Sample commitment: $100 million to $150 million.
  • Mid & Late-Stage, Anchor Investor to New Strategy:
    • Structure: Separate Managed Account
    • Managed by: NYSCRF Direct, Program Partners Firm
    • AUM typically less than $5 billion at the time of commitment
    • Sample commitment: $50 million to $75 million.

Fixed Income:

  • All Stages:
    • Structure: Separate Managed Account
    • Managed by: NYSCRF Direct Firm
    • AUM typically less than $10 billion at the time of commitment
    • Sample commitment: $150 million to $250 million.

Private Equity:

  • Primary Funds: Muller & Monroe Asset Management
  • Co-Invest: Farol Asset Management ($5-$25m samples)

Criteria:

  • Early & Mid-Stage:
    • Managed by: Program Partners
    • Firm AUM: Typically less than $1 billion at the time of commitment.
    • Typical fund size less than $500 million, 1st, 2nd or 3rd institutional fund
    • Sample commitment: $10 million to $30 million.
  • Late-Stage, Transition Structure:
    • Managed by: NYSCRF Direct, Program Partners
    • Firm AUM: Typically less than $3 billion at the time of commitment
    • Fund Size: Typically less than $2 billion – these are usually commitments to existing early and mid-stage emerging managers that have been good partners.
    • Sample commitment: $50 million to $80 million

Real Assets:

Criteria:

  • All Stages
  • Structure: LP’s
  • Managed by: NYSCRF Direct Typical emerging manager
  • AUM less than $5 billion at time of commitment
  • Fund size, typically less than $2 billion, 1st to 4th institutional fund
  • Sample commitment: $100 million to $200 million.

Real Estate:

  • Artemis Real Estate Advisors
  • GCM Grosvenor

Criteria:

  • Early & Mid-Stage
    • Structure: Joint Ventures
    • Managed by: Program Partner (Artemis Real Estate Advisors)
    • Firm equity under management typically less than $1 billion
    • Sample commitment per property: $10 million to $25 million, per venture: $75 million.
  • Seed, Early & Mid-Stage
    • Structure: Joint Ventures, Seed Investments, Funds, Co-investments
    • Managed by: Program Partner (GCM Grosvenor)
    • AUM: less than $2 billion
    • Fund size typically less than $1 billion, 1st, 2nd or 3rd institutional fund
    • Sample initial commitment: $10 million to $30 million.
  • Late-Stage Structure:
    • Funds Managed by: NYSCRF Direct
    • AUM: less than $2 billion
    • Fund Size: greater than $750 million
    • Sample commitment: $100 million to $150 million

Opportunistic & Absolute Return

  • RockCreek

Criteria:

  • All Stages including Seed and Anchor commitments:
    • Structure: LP’s
    • Managed by: NYSCRF Direct
    • Firm AUM: typically less than $3 billion at the time of commitment
    • Fund size: typically less than $2 billion, 1st to 4th institutional fund - Preference for private funds with a 5- to 10-year term.
    • Sample commitment: $50 million to $150 million.

 

How to get started

Now that you know what two major Emerging Manager programs look like, it's time to get started doing outreach and building relationships. At Dakota, this means knowing who to call on, knowing what to say, and having a killer follow up system. 

If you're still struggling to get started, you can check out our 5 Step Guide for Emerging Managers, or learn about our sales methodology, The Dakota Way.

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