The Chicago Policemen’s Annuity and Benefit Fund is looking to complement its existing private debt investments with an allocation designed for strategies that do not fit squarely into traditional asset class definitions.
On Thursday, the $2.9 billion pension released a request for proposals for between one and three $10 million to $40 million allocations for “income generating investment management services”.
The request says that the search is meant to include both public and private credit instruments in primary and secondary markets both in the US and globally as well as equity-based strategies.
The RFP explicitly excludes dedicated direct lending strategies, master limited partnerships, real estate equity funds, mezzanine funds and traditional fixed income strategies such as bank loan, emerging market debt or high-yield portfolios.
“What we are really trying to do is cast the net for some of the esoteric strategies that are out there that are quite cash generative,” chief investment officer Aoifinn Devitt (pictured) told PDI. “We felt that if we were to put out an RFP under strict asset class silos we might miss some of those hybrids.”
Trade finance, consumer finance, CLO equity and real estate debt are among the strategies that Devitt said she expected would be included in the search, which is being conducted with assistance from consultant NEPC. In addition, enhanced dividend equity and derivative-based strategies that generate income will be considered, she said.
Devitt said that Chicago Police will remain open-minded as to whether they ultimately choose to invest with one, two or three strategies.
The RFP says that Chicago Police will consider both open-ended and closed-ended funds, with minimum requirements for each. For open-ended vehicles, the request says that candidates must have returned a minimum annualised cash yield of 5 percent for the past three years.
Closed-ended funds with terms of less than seven years should have a minimum annual cash coupon of 5 percent to be considered, while those with terms longer than seven years should have minimal annual returns of 10 percent. The pension will not consider funds with terms of more than 12 years, according to the request.
Proposals for the income generating investment management services allocations are due by 3 October.
In July, Chicago Police committed $20 million to Monroe Private Credit Fund II after having awarded two separate $20 million opportunistic credit mandates to Beach Point Capital Management and Voya Investment Management in April.