PSERS puts money into real estate, distressed credit

The Harrisburg, Pennsylvania, pension fund is investing in $600m in multiple fund operators that it has done business with in the past.

The Pennsylvania Public School Employees Retirement System (PSERS) has decided to pour $606.1 million into four separate credit funds, a private equity firm and another vehicle that invests in both debt and equity.

On Friday (10 June), the Harrisburg, Pennsylvania, pension fund agreed to invest in six firms, according to meeting documents . The commitments included $100 million to the DRA Growth and Income Fund IX, $75 million to the RCG Longview Debt Fund VI, £75 million ($106.1 million) to Bridgepoint Development Capital III, $100 million in International Infrastructure Finance Company II, $75 million in Värde Scratch and Dent Fund I-A and $150 million in Venor Capital Offshore. 

The DRA fund, an affiliate of New York-based DRA Advisors, will invest in real estate debt, while the RCG fund will put money into real estate debt and equity, public documents showed. Both investments came at the recommendation of Laurann Stepp, a PSERS senior portfolio manager, and PSERS' real estate advisor Courtland Partners.  

PSERS has put $363.2 million in four other DRA vehicles before. Three delivered a total net IRR of 12.4 percent to the $45.8 billion pension fund. The fourth investment came earlier this year. The pension fund is no stranger to RCG as well. PSERS invested $271 million in three prior RCG debt funds and $125 million in the RCG Equity Fund, which posted IRRs of 7.2 percent and 5.5 percent net, respectively.

The Värde Scratch and Dent Fund I-A, associated with Minneapolis-based Värde Partners, will invest in distressed credit and real estate, public documents showed. James Del Gaudio, a PSERS senior investment professional, and advisor Aksia, recommended the investment. Värde is looking to raise $300 million for its Värde Scratch and Dent Feeder fund. PSERS has committed $150 million to another Värde fund, which posted a net IRR of 8.8 percent.

International Infrastructure, sponsored by Harrison, New York-based Mariner Investment Group, will put money into infrastructure debt in secured loan portfolios for infrastructure operators located in Organization for Economic Cooperation and Development countries. Del Gaudio and Portfolio Advisors recommended the investment. 

Venor Capital will plow funds into stressed or distressed companies in the US and Western Europe. Investments will include corporate bonds, bank loans and equity. Robert Little, a PSERS portfolio manager, and Aksia recommended the Venor investment. PSERS previously committed $150 million to another Venor fund, which posted a net IRR of 6.1 percent, investment documents showed.

London-based Bridgepoint will invest in companies with enterprise values of £30 million ($42.4 million) to £125 million ($175.7 million). The company said it will complete three to five deals per year. The pension fund has committed money to five Bridgepoint Europe vehicles. Darren Foreman, a PSERS senior portfolio manager, and Portfolio Advisors recommended the investment.

PSERS, where Jim Grossman (pictured) is the chief investment officer,  approved another round of investments in March, sending more than $300 million to European funds. It sent $200 million to the Hayfin Special Opportunities Fund II, which targets senior secured loans of Western European mid-market companies, and £75 million ($106.1 million) to the Pramerica Real Estate Capital VI, a European real estate debt fund.

Established in 1917, PSERS operates a defined-benefit pension plan serving 600,000 public school employees, according to its website.