New Mexico State Investment Council - Indexminutes - Final

ACTION SUMMARY STATE INVESTMENT COUNCIL February 24, 2009
Item APPROVAL OF AGENDA APPROVAL OF MINUTES January 27, 2009
Action Approved
Page # 2
Approved
DISCUSSION AND VOTE ON ARES CORPORATE OPPORTUNITIES FUND III $50 million investment STATE INVESTMENT OFFICERS REPORT Informational OLD BUSINESS Executive Session re: Vanderbilt Financial Trust FOURTH QUARTER PERFORMANCE REVIEW: NEPC THIRD QUARTER REAL ESTATE PERFORMANCE: COURTLAND NEW BUSINESS None.
No action
Informational
Informational
12
MINUTES OF THE
NEW MEXICO STATE INVESTMENT COUNCIL Santa Fe, New Mexico February 24, 2009
ROLL CALL A regular meeting of the New Mexico State Investment Council was called to order on this date at approximately 9:10 a.m. in the conference room of the State Investment Council, 41 Plaza la Prensa, Santa Fe, New Mexico. A quorum was present, as follows: Members Present: Mr. Patrick Lyons, Commissioner of Public Lands Mr. James B. Lewis, State Treasurer [departing 10:50 a.m.] Mr. Gary B. Bland, State Investment Officer, Acting Chair Mr. Tom Bonafair, Public Member [teleconference, departing 10:15 a.m.] Mr. Stephen L. Feinberg, Public Member Mr. David Harris, Public Member [departing 10:30 a.m.] Members Excused: Hon. Bill Richardson, Governor of New Mexico Ms. Katherine B. Miller, Secretary, DFA Mr. Andrew Davis, Public Member Legal Counsel Present: Mr. Zack Shandler Staff Present: Ms. Kay Chippeaux Mr. Greg Kulka [teleconference] Mr. Adam Levine Ms. Rosalyn Nguyen Mr. Bryan Otero Mr. Rick Scroggins Mr. Scott Smith Mr. Charles Wollmann Guests Present: [See Guest List.]
New Mexico State Investment Council Meeting: February 24, 2009 ......................................................................................1
INTRODUCTION OF GUESTS Guests and staff members were introduced.
APPROVAL OF AGENDA The Agenda was reprioritized. Mr. Bland moved approval of the Agenda, as amended. Mr. Harris seconded the motion, which passed by voice vote.
APPROVAL OF MINUTES: January 27, 2009 Mr. Lewis moved approval of the Minutes of the January 27 meeting, as submitted. Commissioner Lyons seconded the motion, which passed by voice vote.
DISCUSSION AND VOTE ON ARES CORPORATE OPPORTUNITIES FUND III, L.P. Aldus Equity Associate Molly Byrnes introduced Ares Partner David Kaplan and Senior Vice President/Director of Investor Relations/Marketing Merritt Hooper. Ms. Byrnes presented Alduss recommendation of a $50 million commitment to Ares Corporate Opportunities Fund III (ACOF III), a distressed oriented buyout fund currently targeting $4 billion in total capital commitments. She said the Fund focuses on overleveraged and undercapitalized middle market companies, and it was important to remember that these are fundamentally good companies that are hampered by bad balance sheets. Ms. Byrnes stated that Ares Management is an alternative asset investment management group that specializes in both private equity and leveraged finance markets, and currently they employ over 250 people with about $25 billion in assets under management. She said they are spread across three main groups: Private Equity Group, Private Debt Group, and the Capital Markets Group. She said the Fund will be managed by the 23 dedicated investment professionals of the Private Equity Group, which is led by six senior partners who have worked together on average for about ten years, and this history reaches back to Apollo Management, where they handled the capital markets investments for that group. She said Ares was spun out of Apollo in 2001.
Ms. Byrnes said Aldus really likes the experience and expertise this group has in the capital markets in restructurings, and feels this is not only suited to their investment strategy of distressed buyout investing, but it is really suited to the current market environment. She said Aldus feels that Ares is extremely well positioned in the current market; they are seeing rises in defaults, which means that the distressed securities of these quality companies are becoming more available, creating an excellent opportunity for Ares to exploit. She said it was important to note that choosing the right security was also extremely important, and this is especially the case because of the very creative structurings that people were seeing from the 2005-2007 period, along with very lax credit standards. She commented that a company like Ares has the experience to be able to select those all-important fulcrum investment securities. Ms. Byrnes stated that Ares focuses primarily on companies that are overleveraged and undercapitalized, but they are also fundamentally strong companies with strong management, good market share and strong cash flow EBITDA, and can withstand an economic downturn as long as their balance sheets are corrected, and that is what Ares does. Ms. Byrnes said Ares focuses on growth equity, prudently leveraged control buyouts, distressed buyouts and rescue capital. She said Aldus expects to see the latter two especially in this current market going forward. In terms of track record, Ms. Byrnes said ACOF I was a 2003 vintage fund that was generating (as of 9-30-08) a 1.7x investment multiple and a 28.1% gross IRR. She said they have about $500,000,000 of value remaining unrealized in the portfolio. She said ACOF II, a 2006 vintage fund (understandably less realized because it is fairly young), is generating a 1.1x investment multiple and a 13.2% gross IRR as of 9-30-08. She said the Fund II portfolio is impressive because it is very healthythis is a portfolio that was invested in one of the most overheated markets in history, with extremely high leverage and extremely high valuations. She said Ares very much stuck to their strategy during this period of investing where they had a proprietary angle, and using very prudent leverage. She said Ares is consequently very capable of making new attractive investments, whereas many of their peers are hampered by portfolios that are deeply underwater and they are struggling to salvage the investments they currently have. Responding to questioning from Mr. Feinberg on how the portfolios are currently performing, Ms. Byrnes said the December 31 numbers are still with the auditors. Mr. Kaplan said Fund II is probably at a 1x valuation as of December 31, given the step-down in valuations. Mr. Bland asked if these are from the equity valuations, and Mr. Kaplan responded that there are principally two areas: a public stock Ares owns in SandRidge Energy, which is down in the fourth quarter, and a number of distressed
debt positions that it has bought that are fairly strategic and large positions with a goal of trying to buy those companies, and those mark to market values are down. He said January did see a fairly big rally in the credit markets, however. Mr. Kaplan said there are eight companies in Fund II that Ares has toehold positions in, including discounted securities, some bank loans and some senior notes, and there are two positions where Ares owns 50+% of the issue. He commented that it is critically important to pick the right security in the capital structure to buy. He said this is the most dangerous market he has seen in his 18 years of experience because there will be unprecedented things that happen in restructuringsthere is such a lack of liquidity that bankruptcies may not actually allow companies to come out as going concerns, and so picking the right security and having liquidity available in a restructuring will be of paramount importance in this cycle. He said the Ares platform is designed for this kind of market cycle. Mr. Kaplan commented that Ares is being very cautious about deploying capital right now. He said they have about 15%, or about $660 million, of Fund III deployed, all of it in distressed or control investments, and they feel very optimistic. Mr. Bonafair said these are the kind of funds that the SIC should be in. He commented that Ares experience and good track record are a big factor in offering what could be a tremendous opportunity for the SICthere are great companies out there that have been hampered a bit by this environment while they have good management, great products and a great share. He said the PEIAC voted unanimously in favor of this commitment. Mr. Lewis asked if any turnover is anticipated at Ares, and are there any deficiencies in expertise that Ares needs. Ms. Byrnes responded that Aldus likes the longevity of the fund, where the partners have been working together for more than a decade, and Aldus does not anticipate any departures. She stated that the expertise that Ares has built is perfectly suited for this market environment. Commissioner Lyons noted that, in May 2007, the Abu Dhabi Investment Authority (ADAI) purchased a 15-20% stake in Ares Management, and asked why. Mr. Kaplan responded that Abu Dhabi, a sovereign wealth fund in the Middle East, put $375 million into the management company, and Ares used those funds to grow its platform. He said one of the ways they grew by $10 billion last year was by seeding new funds and expanding their platform. He stated that they did not take any money from the company; rather, it was used to strategically grow Ares. He said they will be committing $200 million to Fund III, and a portion of that is from the Abu Dhabi investment.
Commissioner Lyons asked Mr. Kaplan if he anticipated having this happen again, and Mr. Kaplan responded no. He said 80% of the company is owned by the employees, and 20+ people currently own the company. He stated that this is a major part of their compensation scheme, is that the people own the business. Responding to questioning from Mr. Bland, Mr. Kaplan said Ares is excited about having a fund of this size with this amount of liquidity, since it will give them an opportunity to buy some unprecedented quality companies. He said these companies cannot access liquidity from a rescue standpoint, and Ares will be the only source of capital available to them. He added that there are things that took place in January and February from a credit market standpoint that Ares did not see take place in October, November and December. He said some higher quality credit has been issued on companies that are A and AA, so there is some thawing in the corporate credit markets. Commissioner Lyons asked if Ares has considered buying any banks, and Mr. Kaplan said Ares has spent some time looking at distressed buyouts of financial institutions but the possibility of doing that is very low. Mr. Kaplan also clarified that the entire private equity group is located in Los Angeles and that about 90% of their investments are in North America, including Canada. Commissioner Lyons remarked that this looked like a good opportunity for the SIC. Mr. Bland moved, based upon the recommendation of Aldus Equity Partners, the PEIAC and the State Investment Office, that the SIC invest in a commitment of $50 million, not to exceed 20% of the committed capital of the fund, from the National Private Equity Program to Ares Corporate Opportunities Fund III, L.P. subject to and contingent upon New Mexico state law, New Mexico State Investment Council policies and negotiation of final terms and conditions and completion of appropriate paperwork. Mr. Lewis seconded the motion, which passed by voice vote.
OLD BUSINESS Executive Session Pursuant to 10-15-1(H)(7) Threatened or Pending Litigation 1. Vanderbilt Financial Trust
Mr. Bland moved that the Council go into Executive Session pursuant to Section 10-15-1(H)(7) NMSA for the purpose of discussing pending litigation pertaining to Vanderbilt Financial Trust. Mr. Lewis seconded the motion, which passed on the following Roll Call vote: For: Commissioner Lyons; Mr. Lewis; Mr. Bland; Mr. Feinberg; Mr. Harris; Mr. Bonafair. Against: None. [The Council was in Executive Session from 9:30 a.m. until 10:15 a.m.] Mr. Bland moved to return to open session with the statement that no issues other than the issue of Vanderbilt Financial Trust were discussed. Mr. Lewis seconded the motion, which passed on the following Roll Call vote: For: Commissioner Lyons; Mr. Lewis; Mr. Bland; Mr. Feinberg; Mr. Harris; Mr. Bonafair. Against: None. [Mr. Bonafair excused himself from the proceedings.]
STATE INVESTMENT OFFICERS REPORT Mr. Bland said that, as discussed with the Council, the SIO has been trying to get the portfolio into a defensive position for the last year by using an options collar around the portfolio. He stated that, through September, they were in the top 3-4% of the funds, and the SIO only removed the hedge based on concerns around counterparty risk with Merrill Lynch, and canceled the portfolio at that time. He said all of the money was recovered. Mr. Bland stated that, as the market continued to go down in the fourth quarter, the SIO got the hedge back on; however, because of the 18% rally in December, the portfolio lagged considerably in the fourth quarter. On the other hand, he said, with the market down 8-9% in January, the portfolio was down about 2%, and year
to date the total portfolio is down roughly between 4.5% and 4.9%. He noted that the SIO is well into the money on the hedge at this point. Mr. Bland pointed out that the SIO has managed through January to capture and grow the permanent funds by nearly $2.5 billion since he took over as Investment Officer in 2003. Mr. Bland stated that, following NEPCs report, he would ask for consensus from the Council on whether or not the SIO should continue this defensive posture in the portfolio.
FOURTH QUARTER PERFORMANCE REVIEW: ALLAN MARTIN, NEW ENGLAND PENSION CONSULTANTS Allan Martin of New England Pension Consultants presented the Fourth Quarter Performance Review for the period ending 12-31-08. Mr. Martin commented that, in summary, the economy was the worst in a long time, as were the markets across the board, and the SICs fourth quarter performance was bad. Referring to Mr. Blands remarks in his Investment Officers Report, Mr. Martin noted the anomaly of not having the hedge on for October and November, when the markets dropped, with the hedge kicking in during December when the markets rallied. He said the SICs equities in the fourth quarter were 28% when the market was only down 21%, and that led to a fairly difficult quarter. Mr. Martin stated that the positioning of the portfolio at the end of the year is quite appropriate for high volatility and very slow recovery with more downside in the equities; so while the SIC paid a price in the fourth quarter, NEPC thinks the portfolio strategically is in a good place. In his review of the market environment, Mr. Martin stated that real estate and private equity returns are based on appraisals and not market prices, so it can be expected that those returns will be lower in the next quarter. Mr. Martin reported that, over the last 12 months, the combined funds experienced a net investment loss of $4.4 billion, which includes a net investment loss of $2.6 billion in the fourth quarter. He said contributions totaled $717.2 million for the year, while distributions totaled $718.0 million, and total assets decreased from $14.2 billion at the beginning of the quarter to $11.7 billion at quarter end, with $8.3 million in distributions. Mr. Martin reported that, over the past five years, the LGPF returned 1.4% per annum, outperforming its policy index, and ranking in the 57th percentile. He said
the STPF, with more in private equity due to the New Mexico program, did less well at .7% per annum, ranking in the 77th percentile. Mr. Shandler said he understood that, with respect to the LGPF, contributions were exceeding distributions for a long time, and now it is the reverse. Mr. Martin responded that that, for the five years ending 12-31-08, the beginning market value of the LGPF was $7.5 billion, with $2.235 billion in contributions and distributions to education, etc., slightly exceeding that at $2.396 billion. He said that was the history up until about three years ago, when contributions were $1.6 billion and distributions were $1.5 billion, and that trend continued for the one year period ending 12-31-08, the fiscal year to date, and in the last quarter, with more contributions coming in from land use taxes, etc. than were going out to education. He said that is unusual and had to do with getting more land leased and having more oil and gas royalties. Reviewing the performance summary, Mr. Martin said the real issue in the fourth quarter was the underperformance of large cap with the hedge in place, which masked what was actually very strong active management performance in large cap by the SICs managers. He said this is a period where the ICC large cap equity median (median actively-managed large cap manager) did worse than the S&P 500which is unusual, because active management generally does better in down markets because they hold cash and the indexes do not. He commented that this has been quite extraordinary; even for the one-year period, active managers have been a drag in the large cap space. Reviewing the absolute return pool, Mr. Martin said the good news is that the SICs managers did not lose as much money as other market neutral managers, with the quarter down 11.3% and the fund of fund index 13.9%. He said the problem was that the SIO made that investment at a time (three years ago) when people believed that earning LIBOR +2, with low volatility and little correlation with other asset classes, was a hedge against rising interest rates. He said people thought back then that interest rates were going to go up because the U.S. was experiencing an economic growth phase, and there were worries about inflation. Mr. Martin said the negatives to the fourth quarter were the hedgewhich didnt work then, but NEPC has every reason to believe will work going forwardand the credit and structured finance in the alpha pool, which were adversely affected by the tremendous crunch in credit. Mr. Shandler asked Mr. Martin to describe why, if the hedge didnt work in the past, it is expected to work going forward. Mr. Martin responded that a strategy is designed to work well in a range of outcomes, and one of them will happen after the fact. He commented that to judge
the strategy on how one performed in the one outcome that happened, however, is a mistakebecause the strategy isnt built to deal with that one thing. He said NEPC designed this strategy expecting normal economic growth rather than expecting that the banking system would collapse, that there was the possibility of a global depression, and that liquidity would dry up. He stated that, if one were to take the absolute return allocation out altogether and look at the portfolio as though it never happened, the return would be almost identicalso it was a disappointment and not a disaster. He added that he believed there would be recovery here because credit markets have to recover for there to be a meaningful recovery in any of the other markets; and because these strategies are levered, that alone will create tailwind where there has been headwind. He said the period that just ended was the worst in history for hedge funds, so he would argue that this was an anomalous period. Mr. Martin stated that he thought the strategy was positioned well going forward because the underlying assets have not been sold, and the losses reflected are not realized. Mr. Bland added that January and February results are positive on all of these, as well. Mr. Martin commented that, if the economy goes into a depression, the SIC portfolio will not do well although it will do better than a portfolio that is, say, 75% in equity, which would essentially disappear. He said he could not say these strategies would generate positive returns in all markets, but he believed there was recovery potential. Reviewing the domestic equity performance summary, Mr. Martin noted that the SIC-managed large cap active portfolio in December was 18.4%, in 3 years was in the top quartile, and for 5 years in the top third. He said this was a portfolio that ten years ago was a serious drag on performance and has since become one of the SICs best performing managers. In reviewing the alternatives portfolio, Mr. Martin noted that each of the classes is generally outperforming their index. Mr. Martin noted that the land grant private equity program performance record was 12.3% for the 10-year period, lagging slightly behind the Cambridge PE Index. He said this was prior to Aldus coming on board and when the portfolio was largely venture capital. He said Aldus and staff strategically moved more of the portfolio into buyouts, mezzanines and special situations, and the result was 18.3% for the 3 years ending December 31 versus the Cambridge PE Index of 15.2%. Mr. Martin said the severance tax private equity program was not quite as strong, but that contains both the national program and the New Mexico program, which is
an immature program just starting out and which has lately experienced a lag because of events surrounding Eclipse Aviation. Updating the Council on Eclipse, Sun Mountain advisor Brian Birk stated that ETIRC set up a new corporation to buy the assets, with the financing mostly coming from the Export-Import Bank in Russia as well as other sources. He said the financing has been delayed because of the global financial picture and the fact that everyone now is having liquidity issues, apparently including the Export-Import Bank in Russia. Mr. Birk also said the fact that there isnt cash for payroll means that, last week, Eclipse took the painful step of having a temporary furlough of about 800 employees remaining in the plant and in their headquarters. In terms of positioning going forward, Mr. Martin said the SICs actual equity allocation is at 42%, which is below median; and with the hedge it is even less, so the SIC is well positioned. He said the hedge is back in place, and there are strong indications that there is some improvement in the credit markets, and the SIC is well positioned to take advantage of that. He said the SIC will see a bounce-back in the hedge fund portfolios, as evidenced in January, as well as in some of the credit based strategies that the SIC holds either directly in credit or in the private equity portfolio. Mr. Martin stated that the SICs active managers as a group are the best he has seen in quite a while, and hopefully that will continue. Lastly, he said, the SIC has liquid assets, unlike Harvard, Yale, Stanford and CalPERS, which are selling good assets because they dont have enough cash to meet their commitments. He said that, as these bargains become available, the SIC can be a buyer where a lot of other people do not have the cash to take advantage of that. Mr. Martin pointed out that, in January, the SIC large cap active managed portfolio was down 5.2% when the S&P 500 was down 8.4%so the SIC gained 300 basis points. He also noted that the large cap equity composite, with derivatives, was down .1% while the S&P 500 was down 8.4%a difference of 800 basis points against the index. He said that, year to date, the large cap equity composite is down 4.5% with the derivatives portfolio, and without it the SIC would be down 17.55% (through February 23), representing a $426 million gain thanks to the hedge. Concluding his report, Mr. Martin commented that indications are that the SIC is starting to see the benefit, albeit delayed, from having a conservatively positioned portfolio. Mr. Bland said that, as of the close of business yesterday, the portfolio was at about $11 billion with the hedge on, and the SIO has been protecting the principal.
New Mexico State Investment Council Meeting: February 24, 2009 ....................................................................................10
Mr. Bland asked the Council members for their thoughts on whether the SIO should keep the hedge on or remove it altogether. He noted that the market was slightly up today. Mr. Feinberg asked what difference it would make if the market went up 10% and the SIO kept the hedge on, and Mr. Bland responded that the portfolio would likely be up 6-7%, so the $5 billion equity portfolio, on a relative basis, would be down 34%. He said the effect would be the same as in the fourth quarter. Responding to questioning from Commissioner Lyons, Mr. Bland stated that, until he was comfortable that the economy had indeed turned around, he was fine with leaving the hedge on. He said the SIC would still have some equity exposure and could give up a lot of relative performance on the upside, but the SIO is trying to protect the principal as much as possible. Mr. Feinberg said he personally thought the hedge should be left on for a while; if the market goes down, it will be of benefit, and there is no indication that the market will have a sustained rally. He said the SIC will still make money if the market goes up. Commissioner Lyons asked Mr. Bland if the SIO would be able to raise another billion in cash if there is a rally, and Mr. Bland responded that the SIO would do it through the derivatives markets. Commissioner Lyons noted that U.S. core bonds did well for the 3-year period, and asked Mr. Bland to comment on raising $1 billion in cash and converting it to the bond pool. Mr. Bland responded that the problem is that $2 trillion worth of debt will be issued for the bailout plan, and eventually somebody will buy that, and rates will have to go up. He said returns on anything over one year on bonds will go down, and T Bills were .32% today. He stated that the actual cost to carry and purchase them would be negative. Mr. Martin pointed out that the payouts from the Land Grant Permanent Fund are taken from the 5-year moving average market value, and poor near-term performance is not resulting in less money to education in New Mexico by any material amount. He said there is a point where distributions revert to 5.0% depending on the fund balance. Mr. Bland said he has not taken a position on legislation that proposes increasing the number of seats on the SIC, beyond requesting an amendment regarding an experience requirement.
Mr. Bland stated that that there are a number of initiatives on green investing, and the SIC is not taking a position other than making sure that they are operable within in the Fund. He said the SIC has $35 million currently in green investments.
THIRD QUARTER REAL ESTATE PERFORMANCE REVIEW: COURTLAND PARTNERS SIC Real Estate Director Scott Smith was present with Courtland Partners representatives Steve Novick and Joe Cook. Mr. Novick commented that these are unprecedented times, and Courtland is starting to see the deterioration of the fundamentals of real estate for the first time in a very long time, where the increases in job losses is affecting all asset classes. He said they are seeing defaults under existing leases of significant magnitude, where in some cases fully occupied buildings that were leased to defaulting hedge funds are now vacant. He said they are seeing major contractions in the financial service areas, particularly in New York, where law firms are downsizing significantly and space is available for sublets. He stated that multifamily housing is also directly affected by job losses, where young people tend to move out and live with their parents. Mr. Novick said Courtland advises funds that have $25-30 billion of equity invested, so they have a wide range of data, and do not believe they have hit bottom in the real estate market. He said this is not a good time to make tactical investments. Mr. Novick said the core real estate investment universe has been somewhat slow to react to write-downs, and Courtland expects some significant write-downs in the fourth quarter in core real estate. He said write-downs to date are at about 20%, and he would expect that to double. Mr. Novick said a difficulty in private real estate is value. He stated that transactions are down 80% compared to 2007, so there is very little data support on true valuations. He also stated that the only people selling private real estate are under distress because of debt. In order to look at the debt structure of the entire real estate portfolio, Mr. Novick stated that Courtland compiled data from all pooled funds and joint ventures, focusing on scheduled loan maturities over the next five years, and found the following: 17% in 2009, 9% in 2010, 16% in 2011, 42% in 2012, and 8% in 2013 and thereafter. He said 10% of the 17% in 2009 is in one investment. Mr. Novick reported that the current market value of the SICs real estate portfolio is about $528 million and it is invested in 20 funds with a gross real estate value of
$1.5 billion. He said the SIC has hundreds of properties it is invested in through these vehicles, meaning that the portfolio is diverse and very large. He added that there is still about $300 million of unfunded capital on existing commitments, which is a fairly significant amount of dry powderif managers use it correctly, the SIC can recover some of the losses experienced. Mr. Novick said that, going forward, it will be important to focus on current problems, including working with managers to get the best returns. In terms of investments going forward, he said Courtland feels there will be significant opportunities, but there is too much distress in performance and in the manager base. He stated that the manager base throughout the investor universe is somewhat in flux because of organizational changes and shifts, and that will have to play out before Courtland recommends any new deals. Mr. Cook reviewed highlights of third quarter performance. He stated that the return on the total portfolio, calculated on a time weighted return basis since its inception in 2005, is 7.5% and the IRR (dollar weighted) is 2.2%. He contrasted this to second quarter results reflecting a 7.0% IRR and 8.2% on the time weighted return. Reviewing individual portfolio investment returns, Mr. Cook said many investments experienced a loss during the quarter; however, some losses (such as those of AVP and CIM) are not as dramatic as they appear because the investment is at the very beginning. He said Courtland is more concerned about JER IV (-14%), Trammel Crow Acquisitions II (-6%) and Northstar Companies (-18%). Mr. Cook said JER relates to some investments made at the height of the market in hospitality and some residential development. He said Trammel Crow is doing a good job managing properties, but were putting a lot of money out in 2007 at the height of the market. With respect to Northstar, he said they had investments concentrated in the Northeast around hedge fund headquarters, where some of those funds are having difficulty meeting leasing commitments and are underperforming. Mr. Cook clarified for Commissioner Lyons that two of these are closed-in funds, so contractually they have the right to make capital calls. He said they do have frequent conversations with their investors and answer some tough questions, so there are a lot of people making sure that they are keeping their eye on the ball. He commented that they are far more focused on asset management and preserving value than in looking at new deals. With respect to Northstar, he said there is a manager that is responsible for that investment that Courtland works with almost on a daily basis lately. Mr. Smith stated that it was highly unlikely that he would have good news in the next quarter.
SET NEXT MEETING DATE FOR TUESDAY, MARCH 24, 2009, AT 9:00 AM. IN SANTA FE, NM
ADJOURNMENT Its business completed, the State Investment Council adjourned the meeting at approximately 11:45 a.m. Approved by:
Hon. Bill Richardson, Governor Submitted by:
Judith S. Beatty, Council Reporter

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ACTION SUMMARY STATE INVESTMENT COUNCIL February 24, 2009

Item APPROVAL OF AGENDA APPROVAL OF MINUTES January 27, 2009

INTRODUCTION OF GUESTS Guests and staff members were introduced.

Hon. Bill Richardson, Governor Submitted by:

Judith S. Beatty, Council Reporter

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