The New Mexico Educational Retirement Board is putting $100m (€90m) into an in-house co-investment fund.
The Real Assets Co-Investment Fund II will target co-investments, as well as buy limited partnership positions in existing funds on the secondary market.
Mark Canavan, head of real assets for the pension fund, said: “This is an investment programme we think we can be very successful with based on the track record we created with on our first fund.
“The returns on our first fund were 34.2% net of fees through the end of 2015. On a long-term basis, we expect the returns on this fund to be in the mid to high teens on a net IRR basis.”
All of the capital in the $80m Fund I was invested in the purchase of LP positions on a secondary basis.
The programme has now been expanded to include co-investments.
“This new component should allow us to be part of a wider range of investment opportunities,” Canavan said.
Fund II is being placed in the pension fund’s real estate portfolio in the opportunistic sector.
Some of the portfolio will also be invested in infrastructure, agriculture and timberland.
Real Asset Portfolio Management, the fund’s general partners, will be making an unspecified co-investment in the fund.
Investments will typically be in the range of $5m to $12m, allowing the pension fund to have 10-12 investments in the fund.
New Mexico Educational has underwritten a 20% net IRR.
The pension fund expects most of investments to be in the US.
A $2.5m-3m investment in an unnamed UK-based fund has also been made.