US pensions invest more in private debt funds

Several large pension funds have recently made new commitments to vehicles managed by Catalyst, Torchlight, Oaktree and Silver Point, among others.  

US pension funds have continued the steady march into private debt funds, with several committing to new vehicles.

The New Jersey State Investment Council (SIC), which oversees the investments of the $79 billion New Jersey Division of Investments, voted to approve a $100 million commitment to the Catalyst Fund V at a meeting yesterday.

The fund, managed by Toronto-based Catalyst Capital Group, is being formed to take advantage of “the ongoing economic, structural and regulatory environment in Canada,” said New Jersey’s memo on the investment.

It will invest in debt and other securities of distressed and/or under-performing or undercapitalised Canadian public and private companies. The fund is targeting 20-25 percent gross IRR. Fund IV, a 2012 vintage, posted 19 percent net IRR. The fund charges a 1.75 percent management fee and a 20 percent carry on an 8 percent hurdle rate. The vehicle is raising $1.75 billion overall.

The $29.2 billon South Carolina Investment Commission, meanwhile, voted to invest $100 million in the Torchlight Investors Debt Opportunity Fund V, a commercial real estate debt fund.

The New York-based firm is raising $1 billion for the vehicle. It is allocating 35 percent to securitised debt, 20 percent each in general mezzanine, distressed senior mortgages and mezzanine loans/B-notes and 5 percent to preferred equity, according to board meeting documents. The fund is aiming for a 13-15 percent net IRR.

The $24.6 billion Texas County & District Retirement System has also made several distressed debt and direct lending investments this year, according to a recently posted investment transaction report. The pension’s distressed debt commitments went to the Oaktree Opportunities fund X and Xb at $25 million and $75 million, respectively, in February. It also invested $75 million in the Davidson Kempner Long-Term Distressed Opportunities Fund III the same month. In May, the pension doled out €45 million to the AnaCap Credit Opportunities Fund III.

More recently, Texas County & District invested $50 million in the Entertainment IP fund, a direct lending fund focused on the entertainment/media industry. Its other direct lending investments went to Silver Point Specialty Credit fund at $50 million in July and to the OrbiMed Royalty Opportunities Fund II at $35 million in January.