CASE STUDY

New Mexico’s SIO Staff Recommends Aladdin Risk

New Mexico’s State Investment Office (SIO) manages the state’s permanent funds for the citizens of New Mexico in order to maximize distributions to the state’s operating budget while preserving the real value of the funds for the future generations of New Mexicans.

Quotation start

Aladdin has the competitive edge in private asset class modeling, which can largely be attributed to their acquisition and integration of eFront, the world’s leading end-to-end alternatives investment management software and solutions provider.

Quotation end

Whole portfolio view

With $26bn of assets under management in a permanent endowment spanning $18bn in public, and $8bn in private ‘assets,’ New Mexico’s State Investment Office uses multiple vendors and manual processes to maintain oversight of their portfolios including risk and performance analysis. The SIO was reliant on consultants and individual managers to provide reports and was unable to quickly view their whole portfolio with transparency and ease. With Aladdin Risk, the SIO could see their whole portfolio with customizable views that provide transparency with efficiency and ease.

Transparency and reporting

While reporting for investment committee and council members typically required significant time and resources, bringing private and public assets together in Aladdin will allow for a single source of truth and a significantly streamlined reporting framework, both from the top down and from the bottom up.

The search

The SIO monitored the market for integrated risk system products and periodically conducted thorough reviews of specific products over the course of a decade. Within the past several years, several asset-class specific systems were deemed to be of adequate quality and reliability. However, interoperability across systems remained a concern.

In 2019, the SIO conducted a comprehensive review of risk systems in the market, including Aladdin Risk. The technology and data management advances made by Aladdin over the years, including the acquisition and integration of eFront, enabling a whole portfolio solution, were considered to be a competitive advantage for the BlackRock solution.

The decision

Upon the conclusion of the review period, staff recommended that the SIO use Aladdin because “Aladdin has the competitive edge in private asset class modeling, which can largely be attributed to their acquisition and integration of eFront, the world’s leading end-to-end alternatives investment management software and solutions provider.” The staff recommended Aladdin after determining that Aladdin was sufficiently advanced to be fully useful for risk analysis and monitoring needs. The State Investment Council voted to adopt Aladdin.

WHY ALADDIN RISK?

The SIO made the recommendation to the New Mexico State Investment Council to implement Aladdin based on the following features and services:

    • Aladdin will maintain the data management in partnership with the SIO’s custodian and GP’s to source data across public and private markets.
    • Aladdin quality control processes facilitate complete and accurate data.
    • SIO teams can focus on analysis rather than data issues.
  • Aladdin’s risk models are fully integrated across all asset classes allowing for a holistic view of the organization from the top down and the bottom up. These models allow for risk analysis, asset allocation analysis, stress testing and scenarios, highlighting the impact within and across asset classes.

  • Aladdin offers the same technology and intellectual capital that BlackRock uses to manage investments day-to-day. BlackRock’s unique user/provider model brings a practitioner’s perspective to Aladdin.

    BlackRock invests over $200 million a year in the research and development of Aladdin and is continuously focused on innovation by enhancing models, broadening the platform and improving client experience.

  • As a client of Aladdin, the SIO will benefit from having the entire fund on one platform, unifying teams across the organization by providing a consistent view of risks and returns across asset classes and minimizing the need to aggregate data manually from multiple sources.

  • The SIO required a robust risk framework internally that allowed them to run their own risk analysis, perform stress testing and generate high-quality, reliable risk data for all individual portfolios, asset classes and at a total portfolio level, at a reasonable cost for an organization of its size.

    The total cost of the subscription to Aladdin is partially offset by the cancellation of two analysis systems: FactSet and Burgiss. Aladdin’s whole portfolio solution with a single standard for data created more efficiencies in both cost, scale, and the reallocation of personnel to higher-level work.

LOOKING AHEAD

The New Mexico SIO intends to use Aladdin’s whole portfolio solution across public and private assets to see positioning and exposures, understand portfolio risk, stress testing and scenarios, performance and attribution, asset allocation, and factor allocation, in order to gain comprehensive insights across all assets in the fund to facilitate more timely and informed investment decisions.

With the integration of eFront, the New Mexico SIO will also use data collection and aggregation on all private assets including private equity, private real estate venture capital, infrastructure, real assets, and private credit. They will also gain private market benchmarking including Pevara, MSCI, and Pitchbook and performance calculations and analysis with PME and PME+, Alpha, TWR, IRR, TVPI, Lorenz Curve, Value Bridge and advanced analytics provided in intuitive dashboards.

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