The New York State Pension Fund is shifting an existing $ 50 million investment in a small business loan program to the Federal Coronavirus Relief Program, which has drawn public criticism following a problem-laden deployment.
The New York State Common Retirement Fund (NYSCRF) already allocates money to the commercial lender Pursuit, which typically lends small businesses in the state for working capital, equipment or the purchase of real estate, said Monday the New York comptroller’s office. In 2017, the NYSCRF had a $ 400 million commitment with the lender.
But the change transfers $ 50 million into the federal paycheck protection program (P3), which Pursuit also administers for the state. The NYSCRF is also considering redirecting an additional $ 100 million in coronavirus relief efforts.
The federal small business loan program cancels loans if employers use the funds to keep workers on their payroll for at least eight weeks during the coronavirus crisis. Loans can also be used for rent, mortgage interest, or utilities.
So far, Pursuit has allocated $ 200 million to the state as part of the federal bailout program.
Loans, intended exclusively for New York businesses, are capped at $ 350,000. A quarter is specifically intended for businesses owned by minorities or women.
“We continue to seek opportunities to assist New Yorkers who comply with our fiduciary responsibility to the pension fund,” New York State Comptroller Thomas P. DiNapoli said in a statement.
In return for the capital investment, the NYSCRF gets a Pursuit Premium that equates to the yield on U.S. Treasuries, which a fund spokesperson generally says is at a lower number. Recently, US Treasuries saw their yields fall as nervous investors pushed their prices up. A 10-year Treasury yields only 0.63%, according to to Bloomberg data.
The change in allocation comes after reports of a bad start for the federal P3, which was exhausted at first as large companies gathered some of the money. After being criticized by the public, some employers, such as Ruth’s Chris Steak House and Shake Shack, have repaid their loans.
But other large claimants have failed to return funds, leaving small business owners with 500 or fewer employees scratching the barrel for funds.
“Small businesses in New York City are facing unprecedented challenges that have put more than a million men and women out of work,” said DiNapoli. “We’re doing what we can to help small businesses keep their employees on their payroll, even though they may have gone out of business.”
Earlier this month, the comptroller said the state came out of March with more cash than expected, but warned the cushion would quickly erode without federal help.