Tulare County to tap TSSP or Silver Creek for private debt

The Tulare County Employees Retirement Association (TCERA) narrowed its search for a private credit manager as it looks to set aside 5 percent of that asset class in its $1.1 billion portfolio.

The Visalia, California, pension fund at its Wednesday meeting (27 July) chose to continue interviews with TPG Special Situations Partners (TSSP) and Silver Creek Capital Management, as TCERA moves forward with efforts to add private debt investments, retirement board administrator Dave Kehler said. The pension fund plans to select one of these firms for the mandate. Kehler added the pension fund wants to do due diligence and visit each firm.

TCERA decided not to proceed with a joint White Oak Advisors-PIMCO effort, Kehler added. He said in an email the board ruled out the two funds’ bid because of the “administrative difficulty of having to deal with multiple manager issues for a single investment relationship and the fact that the PIMCO funds are not evergreen–a characteristic that the Board wants to have in our Private Credit investments.”

In its pitch to TCERA, documents PDI obtained show, TSSP highlighted its diversified credit vehicle, which includes three sub-vehicles including TSSP Adjacent Opportunities (TAO) and TSSP’s other credit funds. TAO oversees special situations, the adjacencies platform and US direct lending transactions. TSL Europe (TSLE I) oversees European direct lending while TICP II oversees TSSP’s liquid credit platform.

Management fees for TAO include 0.65 percent of undrawn capital commitments and 1.35 percent of invested capital and for TSLE I are 1.5 percent of commitments.

According to the documents, Silver Creek outlined a model portfolio for TCERA. Direct lending loan origination made up 40 percent to 60 percent of TSSP’s hypothetical investments for TCERA. Capital solutions loan origination, performing consumer loan pools and asset finance in special situations each made up 10 percent to 20 percent of the model portfolio.

Non-performing loans and distressed debt would each make up 20 percent to 40 percent of the example portfolio and listed a hypothetical IRR of 14 percent to 16 percent. As part of the sample portfolio, more than half of TCERA’s commitment would be placed with North American companies. 

TCERA’s private credit manager search began earlier this year in March when the pension fund set a 5 percent private debt allocation for its portfolio. Verus, TCERA’s investment consultant, estimated the pension fund could attain 5 percent to 8 percent of direct lending returns along with 8 percent to 12 percent returns in mezzanine investments and a minimum of 12 percent in stressed or distressed investments.