Dallas private debt returns 32.5% below target since May 2016

DPFP is still well under its 5% target allocation for the asset class. 

The Dallas Police and Fire Pension System has posted a 17.5 percent loss on its private debt portfolio since May 2016, according to materials form the retirement plan’s Thursday meeting.

That figure puts the retirement plan 32.5 percent behind the pension fund’s 14.99 percent benchmark return for private debt for the 12-month period.  The fund’s return barometer is the Barclays Global High Yield plus 2 percent.

The pension’s private debt portfolio also showed losses of 19.23 percent for the first five months of the year, according to the documents. Target returns were 7.16 percent. This allocation accounted for $16.3 million (or 0.79 percent) of DPFP portfolio’s net value of $2.1 billion as of 31 May, significantly lower than 5 percent policy target, the May investment report read.

“DPFP finds the Private Debt space attractive and is still planning on reaching the 5% target over time,” a spokesman for the pension told Private Debt Investor

This underweight allocation is due in part to the pension offloading of several debt fund stakes earlier this year, as PDI’s sister publication Private Equity International reported. DPFP sought to raise cash by making asset sales, in anticipation of potential cashflow needs.

The firm sold its stakes in three of its private debt funds, Lone Star Funds VII, VIII, and IX the first quarter. These stakes comprised a total of $85 million in commitments as of 31 March, according to that month’s investment report.

These private debt funds all showed losses last year. Lone Star Fund VII showed a loss of 26.66 percent, while Lone Star Fund VIII posted a loss of 18.93 and Lone Star IX had a loss of 5.88 percent as of 31 December, according to agenda materials. Lone Star did not respond to request to comment. 

“The underperformance in the recent return numbers are driven by the discount taken on the secondary sales and are not reflective of the underlying fund performance,” the DPFP spokesman said. 

The Dallas pension’s total portfolio showed a 0.7 percent return the first quarter and 5.7 percent return over the last year. 

Editor's Note: This story has been updated to include comments from DPFP.