Private credit boosts SFERS portfolio returns

The pension’s private credit allocation was $352m by the end of the first quarter.


San Francisco Employees Retirement System’s fixed-income bucket has showed returns above its policy benchmark for the first first quarter and cited private credit for the strong performance.

The pension plan’s $4.46 billion fixed-income portfolio showed a 1.63 percent return for first three months of this year, above its 1.09 percent return target, agenda materials for the June board meeting show.

“A significant overweight to credit, including emerging market debt, high-yield, commercial mortgage-backed securities, and private credit… drove fixed-income performance during the quarter,” the agenda’s investment performance report stated.

The pension’s private credit allocation accounts for 7.9 percent, or $352.34 million, of the fixed-income bucket. Private credit posted a 3.27 percent return over the first quarter. Private debt returns for previous quarters were not published in the two most recent investment performance reports.

The pension did not respond to requests for comment.

Fixed-income investments showed a 4.58 percent return for the year ending 31 March, compared to its 1.92 percent benchmark. For the three years ending that date, the portfolio returned 3.22 percent, above a 2.99 percent target, and 4.4 percent for the prior five years, above a 2.83 percent goal.

The fixed-income category represents 20.5 percent of its $21.77 billion overall portfolio, slightly above its 20 percent allocation target for the asset class.

The asset class bucket includes a $67 million Bain Capital loan portfolio, which showed 1.32 percent returns first quarter, 17 basis points over its benchmark. Fixed-income also includes a $404 million mandate to the BlackRock US Debt Fund, which showed 0.85 percent returns, also in-line with its benchmark.

SFERS fixed-income portfolio’s focus on floating rate loans has also benefited its performance, “as interest rates have risen and investors have sought out securities that would benefit from a rising interest rate”, the report read. 

SFERS total portfolio showed returns of 4.93 percent first quarter and 14.83 percent and 6.47 percent for the year and three years ended 31 March, respectively.