PA SERS pledges to ‘special situations’

The Pennsylvania State Employees’ Retirement System, which has embarked on a major overhaul of its alternatives programme, has committed $100 million to “special situations”, pledging to Oaktree Capital Management and LBC Credit Partners.

The $25 billion system committed $50 million each to Oaktree’s ninth Opportunities fund, which earlier this year held a first close on $1.2 billion, and LBC’s third Credit Partners fund, the target for which could not be determined as of press time.

“The investments provide [the system] with credit exposure to both the US and global markets, while increasing the alternative portfolio’s liquidity through shorter duration investments, moving the portfolio toward targets outlined in the strategic investment plan,” the pension system said in a statement.

PA SERS announced a major overhaul of its alternatives programme earlier this year with the goal of reducing its exposure to the asset class from around 27 percent to 14 percent over a 10-year period. The system planned to achieve this goal by the natural unwinding of relationships rather than disposing of holdings on the secondary market. GP relationships would be cut down from 149 to between 60 and 80 in five years, and between 40 and 50 in 10 years, according to the system’s 2012-2013 strategic investment plan.

Interestingly, under the plan, the system’s target exposure to private equity would increase from 63 percent of the overall alternatives allocation to 65 percent. PA SERS also will pursue a number of other “strategic initiatives”, including reducing investment fees and emphasising separate – not commingled – investment mandates.

As part of the plan, the system set an annual commitment limit of $500 million to alternative investments. The $100 million in pledges approved this week goes against that annual commitment total, the system said.