News & Analysis

ACERA creates a dedicated private credit bucket

The pension fund plans to allocate 4% of its portfolio ($490m) to the strategy by 2023.

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Buckets

The Alameda County Employees’ Retirement Association is creating a new private credit bucket.

The California-based public pension fund voted at its Thursday meeting to implement a 4 percent allocation to private credit and adopt an investment policy statement for the strategy, a spokesman from the fund confirmed to Private Debt Investor.

The limited partner cited its interest in the strategy as a way to collect higher returns than public debt and enhance long-term risk-adjusted returns. The strategy expects an average annual return of 6.7 percent.

The plan outlines that ACERA will invest $490 million in the strategy by the end of 2022 to reach the target allocation of 4 percent by 2023. The fund plans to achieve this goal by investing in no less than three core investment managers.

The allocation will look into funds operating senior corporate loan strategies with a focus on first- and second-lien products, according to the ACERA meeting documents. The LP will focus on vehicles that target US-based companies and it will have no more than 30 percent of the fund focused in one industry. The pension plan is also targeting vehicles that invest less than 10 percent of their fund into a single portfolio company.

ACERA plans on investing $100 million into the strategy by the end of 2019 and plans to invest $50 million or 20 percent of each fund – whichever is less – for each commitment. The plan outlines that the fund may make larger commitments of up to $75 million or 25 percent of the fund – whichever is less – when doing a re-up commitment.

The pension also approved a new 8 percent allocation to private equity, down from 9 percent.

Recent credit commitments ACERA has made include $9 million to Peak Rock Capital Credit Fund II, $8.25 million to ABRY Senior Equity V and $36.52 million to EQT Credit Opportunities III.

The pension fund was founded in 1948 and serves more than 23,000 public employees in Alameda County, California. The portfolio has more than $8.17 billion in assets under management.