The latest iteration of Lone Star Funds' distressed credit fund has secured a commitment from a returning LP in a pattern expected to repeat as Fund X builds towards a $6 billion target.
The New Mexico Educational Retirement Board (NMERB) approved a $150 million commitment to Lone Star's Fund X at its investment committee meeting on 25 August, according to chief investment officer Bob Jacksha. The $11.3 billion pension's commitment combines $100 million from its opportunistic credit allocation and $50 million from the real estate portion of its portfolio, Jacksha said.
According to materials posted on the pension's website, NMERB has invested 21 percent of its portfolio in opportunistic credit, with an additional 2 percent devoted to emerging market debt. As of June, 7 percent was devoted to real estate.
Jacksha said Fund X's wide focus across US, European and Asian markets, combined with the success of previous investments with Lone Star, helped support NMERB's decision to commit to the fund. He added that Fund X will invest in residential real estate through mortgages and securities, as opposed to commercial real estate, which is the focus of Lone Star's distressed real estate fund.
Lone Star's latest distressed real estate fund closed on $5.9 billion in April after just five months of fundraising.
NMERB also invested in the previous fund in the series, Fund IX, which closed on more than $7.4 billion in August 2014. That fund invested in single-family residential debt, corporate and consumer debt products as well as financial and other operating companies. Fund IX also secured commitments from the Dallas Fire and Police Pension, the Teacher Retirement System of Texas and others.
Lone Star began fundraising for Fund X in June , setting a target of $5 billion, according to an SEC filing , with the option of raising the target to $5.5 billion in the event of a single closing of the US fund and its companion Bermuda fund. A market source indicates that Fund X's target is now $6 billion.
A Lone Star representative did not return a call seeking further detail by press time.
Lone Star is a private equity firm managing distressed debt, real estate, equity, and credit strategies that has secured more than $65 billion in aggregate capital commitments since its 1995 founding. The firm is headquartered in Dallas and maintains offices in New York, Madrid, Frankfurt, Amsterdam, Paris, Tokyo and Hamilton, Bermuda.