SWIB sets private debt agenda for 2016

Senior debt, including primary and secondary purchases, will be the focus of private debt investment for the State of Wisconsin Investment Board (SWIB) this year.

Outlining its agenda for 2016 at a meeting last week, the $93 billion pension fund also said it prefers shorter maturities (eg, five to seven years).

SWIB, which lends directly to local businesses, said it plans to be opportunistic but cautious within subordinated debt. The Wisconsin board is targeting 4-6 percent returns for senior debt and 14-17 percent returns for junior.

The state investment fund also intends to join the Private Placement Investors Association.

The board presentation, from portfolio manager Chris Prestigiacomo, showed that The Wisconsin Private Debt Program had $79.3 million in capital calls in 2015 (up from $40.7 million in 2014) and received distributions of $76.8 million (up from $70.9 million in 2014). This accounted for $2.5 million in net invested capital.

SWIB’s private debt portfolio launched in 2001. It initially targeted investments within Wisconsin, but was expanded to include other Midwest states last year.

The programme has invested about $430 million in 45 portfolio companies. The 10-year performance for the brief was 7.8 percent at the end of 2015, compared with a custom benchmark return of 5.8 percent.

SWIB also invests in private debt funds through its private equity portfolio.

According to a first quarter transaction report, SWIB invested $50 million each in Merit Mezzanine Fund VI and Vista Credit Opportunities Fund II. Chicago-based Merit Capital Management is raising $600 million for its sixth mezzanine fund. Vista Capital Partners is targeting $750 million for its second credit fund.

SWIB also reported a $150 million investment in Lone Star Real Estate Fund V, which invests in commercial real estate debt and equity in the Americas, Western Europe and Japan. The vehicle is targeting an April close with $5.5 billion.