Tulare County sets 5% private credit allocation

The California pension fund has established a first-time private credit allocation following a recommendation from its consultant, Verus.  

The Tulare County Employees Retirement Associations (TCERA) is establishing a maiden private credit allocation at 5 percent. Trustees of the $1.2 billion TCERA approved the 5 percent target following a recommendation from its investment consultant, Verus. The allocation translates to about $60 million of the total pension fund.

Verus has been directed to bring in potential private credit managers for the board to consider in April, retirement administrator David Kehler told PDI in an e-mail. The board will then narrow the list down to a group of finalists to do manager presentations before a final selection is made, Kehler said.

In a presentation to the board, Verus noted that private credit is not just about distressed debt. The firm is seeing three major themes in private credit opportunities: mid-market direct lending, mezzanine and distressed. Some of the key benefits of private credit investments would be the illiquidity premium, higher yield and deals higher up in the capital stack, Verus said. But the consultant also noted that challenges could include investments that are difficult to benchmark, high fees and borrowers that may be of lower credit quality or unrated.

The firm expects to achieve 5-8 percent returns on direct lending, 8-12 percent on mezzanine and at least 12 percent on stressed or distressed.

Verus is headquartered in Seattle, Washington and has additional offices in Los Angeles and San Francisco. It was formerly known as Wurts & Associates. Verus merged with another West Coast institutional consulting firm, Strategic Investment Solutions, last year. The firm advises many other large and mid-size pension plans in the US. Verus oversees $337 billion in advisory and discretionary client assets.