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PSERS commits $250m to Bain credit fund

The Pennsylvania pension made its first private equity-related commitment this year, betting on a credit strategy.

The $43.2 billion Pennsylvania Public School Employees’ Retirement System (PSERS) has made its first private equity-related commitment in 2009, investing $250 million in a Bain Capital-affiliated credit fund.

The Sankaty Middle Market Opportunities Fund is seeking a target of $750 million, which will be used to invest in mid-market debt, including mezzanine loans. The fund will target credit for new buyouts, rescue financing and secondary purchases of mezzanine debt, according to media reports. The fund reportedly will charge a 1.25 percent fee on drawn capital with a 20 percent carry, and is scheduled to close in November, according to media reports.

Sankaty Advisors, the credit affiliate of Bain Capital, is also raising $400 million to provide loans allowing companies to operate in bankruptcy, known as debtor-in-possession (DIP) loans.  Sankaty manages about $19 billion.

PSERS has not made a commitment to private equity in 2009, after pulling back from hundreds of millions of dollars in recommended commitments earlier this year. The pension canceled the recommended commitments to battle its over-allocation to private equity, which at the time was over-weighted by 10 percent from its target allocation of 14 percent. The allocation now stands at 16.9 percent.

A pension spokesperson said PSERS has no plans to commit to private equity funds this year.

The pension reported a decline in the total value of its assets of -26.54 percent for the year ending 30 June, 2009. Specifically, private market investments were down -27.23 percent for that time period. Real estate was down -42.68 percent.

However, the pension also sounded an optimistic note, as it earned a positive 9.11 percent for the quarter ended 30 June, 2009. Private equity investments appeared to be stabilising, the pension said.