Private debt soars for South Carolina

Private debt was a ‘major source of outperformance’ for the $25bn retirement systems, according to an investment report. 

Strong performance in its private debt portfolio improved the South Carolina Retirement Systems’ overall investment returns, according to documents the $25 billion retirement system made available to Private Debt Investor.

“Major sources of outperformance during the past 12 months included private debt and hedge funds,” according to documents the retirement system provided to Private Debt Investor. “The main detractor from relative performance over the past 12 months was private equity.”

South Carolina’s overall investment portfolio lost 0.9 percent during the second quarter, falling short of its benchmark by 0.2 percent, according to documents.

As of 31 March, South Carolina’s $1.8 billion private debt portfolio had generated an 11.31 percent net internal rate of return since inception, according to retirement system documents. Private debt accounts for approximately 34.5 percent of the retirement systems’ private markets portfolio net asset value.

The private market portfolio also includes real estate and private equity investments. The retirement systems’ alternatives allocation has commitments to global tactical asset allocation, absolute return, opportunistic credit, real estate, derivatives and strategic partnerships, according to a 2012 annual report.

In April, South Carolina approved an annual investment plan that reduces its exposure to diversified credit by 1.5 percent.

“The lower target reflects the fact that the Fund is fully allocated to the Private Debt/Opportunistic sub-category,” according to the 2013-2014 plan. “Further, market opportunities for High Yield/Bank Loans and Emerging Market Debt are less attractive relative to the opportunities in other return-seeking asset categories.