Chicago Police boosts private credit exposure

The Chicago Policemen’s Annuity and Benefit Fund has doubled its portfolio’s private debt target and invited back an array of managers as it seeks to increase its commitments to alternative investments.

The $2.4 billion pension fund approved a recommendation to increase its private credit asset allocation from 4 percent to 8 percent at the investment committee’s 22 February meeting, chief investment officer Aoifinn Devitt said in an email. It also narrowed its search for potential managers in two different sub-asset classes: a multi-manager dedicated to generating income growth for the fund and a real estate debt manager.

In addition to upping its exposure to private credit, Chicago Police also increased its target allocation for international equities from 14 percent to 15 percent and decreased its global asset allocation category from 10 percent to 5 percent. The latter includes two separate funds – one run by GMO and the other by PIMCO.

Devitt said,“The bulk of our private credit exposure to date has the twin benefits of generating a healthy cash coupon, which is critical to offset our negative cash flow at a fund level, and providing exposure to floating rate securities thereby insulating part of the fund from interest rate exposure.”

BluePrint Capital Advisors and Silver Creek Advisory Partners were selected to give presentations to the investment committee for the multi-manager opening. Chicago Police plans to commit $10 million to $40 million and could select up to three managers, according to the request for proposal on the fund’s website. This strategy’s investments would include both public and private credit in the primary and secondary markets both in the US and abroad.

Multi-management investment vehicles can be open- or closed-ended fund. Applications were due in October.

For closed-ended funds, if it has up to a seven-year life, the fund must have a minimum annual cash coupon of 5 percent, according to the RFP. If the fund term is between seven years and 12 years, it must have an annual cash coupon of at least 10 percent. Closed-ended funds with a life exceeding 12 years won’t be considered.

Open-ended funds must have a minimum annualised cash coupon of 5 percent for the past three years and have an auditable track record of three years for Chicago Police to consider the investment vehicle.

Brookfield Asset Management, Oak Street Real Estate Capital, Oaktree Capital Management and Sound Mark Partners are under consideration for a real estate debt commitment. Chicago Police are currently underweight in their real estate exposure – the pension fund set a target allocation of 5 percent, and its current allocation is 3.6 percent.

Last summer, Chicago Police made a $20 million commitment to Monroe Capital for the Chicago-based firm’s Private Credit Fund II, which closed at $844.3 million. The pension fund also pledged $20 million to Alcentra in March for a direct lending mandate. Chicago Police previously committed $15 million to the Lone Star Fund X, which closed at $5.6 billion.