San Joaquin taps Crestline, White Oak for DL mandates

The $2.5bn California pension fund has invested $50m apiece in direct-lending funds managed by Crestline Investors and White Oak Global Advisors.

The San Joaquin County Employees Retirement Association (SJCERA) has committed $50 million each to the Crestline Opportunity Fund III and the White Oak Summit Fund, both direct-lending funds. 

The firms were approved by the pension funds board of directors and recommended by consulting firm PCA at a meeting on 23 October, according to recently released meeting minutes. 

The $2.5 billion pension fund initially planned to interview three firms, Crestline, White Oak and Silver Creek Capital Management, and then select one to handle a direct-lending mandate. Silver Creek, however, was not interviewed and the pension ultimately selected two firms. The pension’s management did not respond to questions on why Silver Creek was taken out of the running or two firms were chosen.

San Francisco-based White Oak is raising $1 billion-$1.2 billion for its Summit fund, which offers term loans, asset-based loans and other specialty lending products to companies with enterprise values of $50 million-$1 billion. The Summit fund plans to make 30-40 investments in senior secured loans. White Oak is charging a 1.25 percent management fee and a 15 percent carry with a 7 percent hurdle, according to SJCERA documents.

Fort Worth, Texas-based Crestline Investors is targeting $1 billion-$1.25 billion for its Crestline Opportunities Fund III. The firm pursues an absolute return strategy that invests across a range of credit and credit-related opportunities and directly-originated investments.

The pension fund was an investor in the predecessor Crestline Opportunities Fund II, which has so far returned 7.4 percent for the one year through 30 September. SJCERA documents noted that the pension targeted a 9 percent annual return for the Crestline fund, though expects it to gain more momentum in coming years. 

“The Crestline investment is early in its investment cycle, and it is expected that returns will improve as the portfolio’s investments mature,” the documents said. The mandate was funded in November 2013.

Crestline’s current portfolio is diversified across asset-backed equity, senior secured debt and subordinated debt/structured equity. SJCERA investment staff and PCA recently paid visits to the firm for due diligence purposes.

“The team mentioned that they had planned on doing more co-investment opportunities when the fund originally started, but the lack of opportunities and the inability to have voting rights on these deals has limited them,” said PCA’s meeting notes.

Crestline is an alternative investment manager handling a variety of strategies including private credit, specialty lending, CLOs, opportunistic funds and multi-manager hedge funds. The firm was founded in 1997 and originally funded by the Robert Bass family office, which is also how credit specialist Oak Hill Advisors got its start. Crestline has about $9.9 billion in assets under management, including $4 billion in opportunistic and private credit strategies. 

Meeting notes from SJCERA regarding White Oak are not yet available.