The $103 billion State of Wisconsin Investment Board (SWIB), which handles a portfolio of direct debt investments in the state, is looking to expand that programme to other states. According to a presentation made by portfolio manager Chris Prestigiacomo at a board meeting today (8 April), the retirement plan is looking to take advantage of opportunities as it sees more market relevance in private debt investments as well as the potential for good returns and credit diversification.
SWIB hasn’t yet revealed how much it could allocate to non-Wisconsin private debt.
The pension plan launched the credit programme in 1983 and has invested about $2 billion across 200 transactions so far. Most of the transactions have been in Wisconsin with minimal exposure to other Midwest states, including Minnesota, Iowa, Illinois and Michigan. The investments are via both senior and subordinated debt. Ninety percent of the current portfolio loans Wisconsin companies with the remaining 10 percent lent to borrowers based in Michigan and Illinois. Outstanding loans total $440 million to 50 companies.
The platform provides senior financing to mid-market companies with revenues ranging from $30 million to $750 million and subordinated debt to lower mid-market companies with revenues of $15 million to $150 million, according to SWIB’s website. PDI reported last year that the retirement fund has enjoyed good long-term performance in its private debt portfolio.
If SWIB goes ahead with the plan to create a non-Wisconsin private debt bucket, it will move the existing non-Wisconsin loans to the new portfolio and expand the scope to include Indiana, Ohio and Pennsylvania.
Most of the new investments will be made to companies rated triple B or better by a national rating agency or the National Association of Insurance Commissioners. The existing programme limits below investment grade lending to 25 percent of the overall par value of the portfolio and loans to sub-investment grade borrowers require approval from SWIB’s managing director of private markets (currently Charles Carpenter), the documents said. The new non-Wisconsin portfolio will be benchmarked to the Barclays Duration Adjusted BAA Corporate + 20bps index.