Alaska to commit $560m in PE, debt investments in 2017

The Last Frontier State’s pension fund is currently conducting due diligence on KKR Lending Partners III. 

 The Alaska Retirement Management Board plans this year to deploy $560 million in private equity commitments, including debt investments, a $30 million uptick from last year, according to materials for its 20 April board meeting.

The allocation increase is part of an effort to boost the pension fund’s private equity and debt exposure to 12 percent of its portfolio, up from the current 8.2 percent. Debt investments made out of the private equity bucket include direct lending, subordinated debt and distressed debt.

ARMB, which invests in private equity through an investment committee and external consultants Abbott Capital Management and Pathway Capital Management, ended up making 41 commitments worth $577.7 million – higher than the target – to private equity in 2016.

The upping of private equity and debt money comes as the pension conducts due diligence on KKR’s latest direct lending fund, Lending Partners III. The fund noted KKR’s global head of private credit, recently departed, which the ARMB said it will monitor while it carries out its due diligence. According to PDI data, the Juneau, Alaska-based fund committed $200 million to Lending Partners II, which garnered a total of $1.34 billion. So far LP III has raised $421.31 million.

Lending Partners II had a management fee of 1.25 percent on contributed capital, according to South Carolina Retirement System Investment Commission October 2014 meeting minutes. The fund had an internal rate of return of 13.16 percent as of 31 December, according to a Minnesota State Board of Investment quarterly report.

ARMB’s distressed debt investments, which include $30 million to the $1 billion Glendon Opportunities Fund, have posted returns of 11.9 percent and 9.4 percent for the five- and 10-year time periods, respectively. Twenty-year returns posted 10.7 percent. -Annabelle Ju and Justin Slaughter contributed to this report.