Florida SBA sees opportunity in credit strategies

The US pension fund’s investment office says European banks deleveraging, distressed debt and dislocated credit are the current areas of market opportunity within its strategic investments portfolio.  

The Florida State Board of Administration (SBA) is eyeing several opportunities including European lending, distressed and “dislocated credit” created by market conditions and volatility.

In a presentation to the pension's board on Wednesday, Trent Webster, senior investment officer for strategic investments and private equity, said “European bank deleveraging and disintermediation” were driving some of the market opportunities.

He also saw distressed opportunities beginning to emerge globally.

Florida SBA's strategic investment portfolio includes a range of alternative strategies. In credit, it houses distressed, special situations, mezzanine, senior loans and opportunistic debt investments. The rest of the brief includes a variety of hedge fund strategies, timberland, real estate and other alternative investments. The $176 billion pension fund has a 12 percent target to strategic investments.

The pension plan hired four new funds at $600 million for its strategic investment portfolio in the fourth quarter of 2015 and five more at $675 million this quarter. The pension fund's current strategic investments pipeline consists of 12 funds at $1.7 billion across a variety of strategies.

The strategic investments portfolio has outperformed SBA's custom benchmark for the one, three and five-year periods, as well as since inception, according to Webster's presentation.

The pension fund has recently invested in energy credit funds with GSO Capital Partners and Chambers Energy Capital, according to previously announced transactions. It has also made commitments to special situations, distressed and real estate debt funds with Atalaya Capital Management, Colony Capital, Lone Star Funds and Cerberus.

SBA's alternative credit manager roster also includes Oaktree Capital Management, Benefit Street Partners and CarVal Investors, according to PDI Research & Analytics.