Philadelphia pension’s private debt portfolio underweight

The asset portfolio is roughly six-and-a-half times smaller than its 2% target.

The City of Philadelphia Board of Pensions and Investment’s current allocation to private debt is under its target for the asset class, according to its latest monthly investment report.

The Philadelphia public pension plan’s private debt bucket totalled $14.34 million, or 0.3 percent of its total $4.82 billion portfolio as of 31 July, the report showed. That percentage is more than six-and-a-half times smaller than its target allocation of 2 percent.

The pension plan’s private debt and private equity buckets – labeled under one Private Assets umbrella – both showed negative cashflows the three months ending that date, with private debt showing a net loss of $1.99 million and private equity showing a net loss of $7.7 million.

The combined private debt and equity allocation totalled $417.63 million, or 8.7 percent of the total balance sheet, as of 31 July. The two asset classes together showed 5.8 percent and 4.7 percent returns over the one-year and three-year periods ending that date, respectively.

The pension expects average annualised returns over 10 years of 10 percent for its private debt portfolio and 11.6 percent for its private equity portfolio, according to its investment policy statement approved last September.

The Philadelphia-based pension plan has made several commitments to distressed and mezzanine debt funds, including Mesa West Real Estate Income Fund II; Levine Leichtman Capital Partners IV; and Versa Capital Fund I and II, PDI data showed.

The pension plan did not respond to a request to comment.