North Dakota eyes Cerberus and other fund managers

The pension has suggested replacing its entire global debt allocation with US debt.

North Dakota’s public pension fund is interviewing Cerberus Capital Management, while conducting due diligence on several more investment firms, for a new private credit manager, according to an agenda for the March board meeting.

Cerberus is poised to receive $200 million from the pension fund, David Hunter, chief investment officer, told Private Debt Investor. He added that the pension has chosen Ares for $200 million separate account. 

The pension’s deputy chief investment officer, Darren Schulz, will present his recommendation for a new fund manager at the 24 March meeting of the North Dakota State Investment Board, the agenda shows.

The vote on Friday for a new manger comes as some of its staff have pushed for the fund to boost its US debt investments and axe its international debt.

SIB’s retirement and investment office recommended that the board up its US credit allocation from 17.9 percent of its portfolio to 23.3 percent, or $1.1 billion, according to the 24 March agenda.

That office also recommended that the board “tilt” its US credit commitments toward floating rate debt due to the rising rates, and specifically cited direct lending as one way to achieve that. The board also suggested increasing the return expectations on its US credit allocations from 3 percent to 3.5 percent.

The direct lending allocation amount was not disclosed. 

The pension is interviewing Cerberus and is weighing the investment opportunities of several of private credit’s biggest players, according to minutes for the January meeting.

The North Dakota staff was conducting due diligence on Loomis Sayles, Manulife, Brandywine, PIMCO, UBS, and Wells Fargo as of the end of January, documents show. SIB had already conducted due diligence on direct lending platforms at AllianceBernstein, Golub, Antares, Highbridge, Ares, KKR, Bain, Carlyle, Cerberus, PIMCO, Crescent, TPG Specialty Lending, and Goldman Sachs.

If SIB signs off on the portfolio allocation change, North Dakota’s international debt allocation would fall from 5.4 percent to zero. The pension’s retirement and investment office cited the concern that “international debt has become increasingly less attractive due to unprecedented monetary policy by central banks (resulting in negative interest rates) and escalating foreign currency volatility due to uncertain geopolitical risks”.

In January, staff at the pension also recommended in the future increasing its credit allocation from 23.3 percent to 30 percent of its overall portfolio, the minutes show. The March agenda counts SIB’s total assets at $4.8 billion.

The North Dakota pension has invested in distressed and mezzanine debt funds, including corporate and real estate-focused funds, globally. The pension has a $100 million commitment in the PIMCO BRAVO FUND II, according to PDI data.