Orange County backs direct lending

The $9.8bn retirement has made a $110m bet on direct lending strategies from NXT Capital, Monroe Capital and Crescent Capital.

The Orange County Employees Retirement System’s investment committee approved $110 million in commitments across three managers at its meeting last week, a spokesperson for the $9.8 billion retirement system told Private Debt Investor.  

The commitments include $50 million to Monroe Capital and $30 million each to Crescent Capital and NXT Capital, the spokesperson said.

The committee approved a search for direct lending managers in January. The managers were vetted by Orange County’s investment consultant NEPC.

Last year, the investment committee approved a 7 percent allocation to diversified credit strategies, with a 15 percent sub-allocation to direct lending. The retirement system had 4.6 percent allocation to diversified credit as of March, according to retirement system documents.

Earlier this week, Orange County announced that it would be taking a tougher stance on investment fees in an effort to reduce its investment programme’s costs.

“What caught our trustees’ eyes was the large increase in indirect investment expenses, when they looked at the 2013 investment budget,” OCERS chief investment officer Girard Miller told sister publication Private Equity International. “Because those costs are indirectly charged against fund expenses, and not billed directly, they were not highly visible before.”

The system’s indirect investment management fees jumped in the 2013 budget from $22 million to $45 million, according to documents from OCERS. “[That] was a compelling reason to revisit our fee policy and become more proactive in this space,” Miller said.