The Michigan Department of Treasury 's Bureau of Investments sent a total of $500 million to two private debt funds on behalf of the Michigan Retirement Systems, according to a quarterly report presented to the state's investment committee last week.
Among other alternative investments totaling $1.6 billion, the bureau revealed it had committed $250 million each to Czech Asset Management's SJC Direct Lending Fund III and the former Highbridge Principal Strategies' HPS Red Cedar Fund. Highbridge was re-named HPS Investment Partners after spinning out from JPMorgan in March.
In the report's executive summary, Peter Woodford, senior investment manager for the pension fund's private equity division, wrote that the group would focus on credit for the next three to six months and that it is evaluating several opportunities in the space.
“Since the middle of 2015, syndicated credit markets have experienced a significant dislocation, presenting attractive investment opportunities for private mezzanine capital,” according to the summary. “Mezzanine debt is attractive, particularly in the current cycle, because of low issuance of leveraged loan and high yield debt, attractive coupon rates, low default rates, potential for equity upside and co-investment,” Woodford wrote.
In May, Czech announced it had closed SJC III on $1.7 billion, surpassing the fund's initial goal of $1.5 billion. According to the statement, SJC III provides US mid-market companies with annual revenues between $75 million and $500 million and EBITDA between $7.5 million and $50 million with privately-negotiated, floating rate, senior secured loans. As of early May, the fund had invested approximately $215 million.
SJC III also secured a $75 million investment in late May from the Arizona Public Safety Personnel Retirement System.
The HPS Red Cedar Fund is a mid-market focused direct lending separate account managed by HPS.
Earlier this month, PDI reported that HPS is also in the market with its fourth direct lending fund .