The New Mexico State Investment Council may delay finalising recommended commitments to two private equity funds as it sorts through its relationship with its suspended private equity advisor Aldus Equity.
“They might be delayed, they might not be, we haven’t really made a call on that yet,” the spokesman said. “We’re trying to figure out how to move forward, and until this resolves itself, there could be a bit of a slow down.”
The state’s $11.5 billion oil and gas endowment recently suspended Aldus Equity because of the firm’s ties to a kick-back scandal with the New York State Common Retirement System.
Aldus has not been accused of any wrongdoing in the case, but did make payments to an alleged sham placement agent, who has been indicted in the case.
The endowment is spending time reviewing Aldus’ work since it was hired in 2004, a spokesman said. New Mexico SIC has asked all managers it works with across all asset classes to disclose whether they used any third-party marketing firms or placement agents, the spokesman said.
So far, the endowment has discovered The Carlyle Group and Quadrangle Group worked with a company affiliated with the indicted person, Henry Morris, to secure commitments of $20 million each from New Mexico SIC. Morris, a former political official with former New York State Comptroller Alan Hevesi, and David Loglisci, former chief investment officer of the $122 billion New York pension, were both indicted in March by New York’s attorney general, Andrew Cuomo.
Some of the firms New Mexico SIC has asked to disclose third-party information have declined, the spokesman said, and the endowment will hold further discussions with those firms. The spokesman declined to name the firms that have declined.
The advisory committee of the New Mexico SIC made two private equity commitment recommendations in March – $30 million to Landmark Equity Partners XIV, a secondary fund targeting $2 billion, and $30 million to New Stone Capital Partners II, a debt fund.
Because the commitments to Landmark and New Stone were recommended by Aldus, the endowment will investigate how those recommendations were made, the spokesman said.
New Stone Capital has had dealings in the past with Aldus and the New York pension. New York Common made a $15 million commitment to New Stone’s first fund in 2007 through its Aldus/NY Emerging Fund. The Aldus/NY Emerging Fund was created after Aldus agreed to pay Morris a sham finder’s fee equal to 35 percent of the management fees the firm received from the New York pension, according to an SEC complaint. The New York pension bought a $175 million limited partnership in the emerging fund in 2004, and an additional $200 million interest in 2006. In exchange, Aldus paid a Morris-affiliated company $319,374, the SEC said.
New Mexico SIC is still committed to private equity as an asset class, which it has invested in since 1989, the spokesman said.
“Private equity has been very effective for us … when something like this happens, it’s a concern, we want to make sure all the I’s are dotted and T’s are crossed,” the spokesman said.