Ohio PERS renews private debt strategy in alternative assets shake-up

The pension system is looking for a return to investment in the private credit market.

  • Institution: Ohio Public Employees Retirement System
  • Headquarters: Columbus, US
  • AUM: $87.9 billion
  • Allocation to alternatives: 28.6%

Ohio Public Employees Retirement System plans to increase its alternative assets allocation by 6 percent in 2023, according to materials from its 15 November retirement board meeting.

The pension system is looking to up its exposure to private markets from 27 percent to 33 percent going into 2023. Part of this change involves a jump back into the private credit market, with no capital committed to the asset class since 2013, according to Private Debt Investor data.

The pension does not currently include private credit in their total investment portfolio but seeks to set a 1 percent target benchmark for the asset class.

The asset allocation proposals were finalised following a mixed recommendation between Ohio PERS staff and NEPC, the investment consultant to the pension’s private markets opportunities. The changes are being facilitated by aligned reductions in the public sphere, with a drop in both public equities and fixed income.

NEPC’s Private Markets group works with clients as part of general consulting mandates and as part of specialised, stand-alone private markets mandates. Its services include developing the investment policy, overall allocation and strategic planning, manager search and due diligence reviews, performance monitoring, and education.

Ohio PERS has outlined its reasoning for the changes, highlighting a wish to tackle the challenging investment returns felt by LPs across the globe, as well as the continuation of stagflation dynamics, which reinforces the need for strong management and diversification of its private markets’ investment programme.

Ohio PERS is looking to implement a fairly diversified private credit portfolio composition, with 50 percent allocated to direct lending and the remaining 50 percent devoted equally between distressed and opportunistic credit.

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