IPERS seeks managers for $500m in private debt

The Iowa pension plan has $29bn AUM and a private debt target of 5 percent.

The Iowa Public Employees’ Retirement System is looking for firms to manage a total of $500 million in private debt, including corporate and real estate, the $29 billion pension fund said on Friday (5 May).

The fund plans to hire one or two firms to manage a separate account or fund-of-one of $250 million for private corporate debt and one to two firms to manage a separate $250 commercial real estate debt portfolio, according to the RFPs. Submissions are due 3 pm on 2 June.

The prospective corporate debt manager will primarily provide direct senior secured credit, and not distressed debt or CLOs, the proposal states. The investment benchmark for the corporate debt mandate will be the total return listed on the S&P/LSTA Leverage Loan Index plus 100 basis points, net of all fees.

Requirements for the vehicle include at least 50 percent of exposure to US private credit, a cap of 20 percent on opportunistic investments and a 10 percent maximum exposure to any one industry as well as borrower or sponsor.

Simultaneously, IPERS is also seeking a real estate debt manager for primarily mezzanine debt, b-notes, first mortgages and construction loans backed by all major asset classes predominately within the US. This portfolio will target a net annual return of greater than 7 percent.

At least half of the assets backing the loans must be in the US. IPERS also plans to put a 20 percent limit on exposure to any single metropolitan area and a 40 percent cap on exposure to any one property type.

Both mandates may allow leverage up to 1.25x the original commitment. Neither the corporate debt or real estate debt manager may target opportunities in developing economies, the documents show. The selection process for both mandates will consist of three phases.

In the initial stage, managers will submit both qualitative and quantitative data. Those that move onto the next step in the process will submit information about their investment strategy, portfolio construction, risk management and fees, among other details. The final phase will include on-site visits and will evaluate the potential manager’s operations, stability and its capacity to work with IPERS.

IPERS was not immediately available to comment.

The  Des Moines, Iowa-based pension plan has a target private debt allocation of 5 percent, Private Debt Investor data shows. Last May, IPERS selected Monroe Capital and Tennenbaum Capital Partners for its first direct lending mandate, overseeing a total of $400 million, as PDI reported then. IPERS also made a $150 million commitment to Blackstone Real Estate Debt Strategies II, a 2013 vintage year fund.