Searches and Hires

Orange County to launch private equity consultant search, revamps credit portfolio

Orange County Employees Retirement System, Santa Ana, Calif., plans to launch a search for an additional consultant for private equity and other illiquid investments, said Robert Kinsler, spokesman, in an email.

Currently, Meketa Investment Group is the $14.7 billion pension plan's alternative investment consultant, but pension fund officials plan to hire a consultant to provide "a discrete assessment pertaining to access to best-in-class global private general partners," according to a memo for the Sept. 19 investment committee meeting. Further information was not provided.

Officials expect to launch the RFP on Oct. 1. Responses would be due on Oct. 31 with a selection expected in February. The RFP will be posted on OCERS' website.

Separately, after a credit asset allocation review, OCERS divided its 13% target credit allocation into four subasset-class allocation targets. They are 40% of its $2.6 billion credit portfolio in corporate credit, 20% in private credit, 20% in emerging markets debt and 20% in opportunistic credit. Currently, some 29% of the credit portfolio is in corporate credit, 30% is in private credit, 17% in emerging market debt and 24% in opportunistic credit.

At the same time, pension fund officials reclassified its riskier direct lending strategies, which is part of its private credit strategy, to its $787 million private equity portfolio. OCERS increased its target allocation to private equity by 2 percentage points to 8% when it adopted a new asset allocation in January. OCERS' direct lending investments that are being reclassified as private equity are a $178.4 million investment in OCP Asia Orchard Landmark Fund I, $87.4 million in Park Square Capital Credit Opportunities II, $56.3 million in OCP Asia Orchard Landmark Fund II, $52.9 million in Monroe Private Credit Fund II, $48.2 million in Alcentra Clareant Euro Direct Lending Fund II and Park Square Credit Opportunities III. There are no assets in the Park Square Credit Opportunities III portfolio currently; OCERS committed $50 million to the fund in December 2016.

Also, as part of the credit allocation review, OCERS is redeeming its $144.6 million investment in PIMCO DISCO II, a distressed senior credit fund managed by Pacific Investment Management Co., a strong performer that has returned 13.8% since inception. OCERS invested $75 million in PIMCO DISCO II in May 2012. The pension fund already terminated investments in three credit hedge fund portfolios in July: Tricadia Capital Management, which managed $152.1 million, CQS' $146.9 million portfolio and Caspian Capital Advisors portfolio with $12.3 million.

OCERS is also trimming emerging market debt managers' allocations as a result of the credit review. BlueBay Asset Management's $263.3 million portfolio will be reduced by $75 million and Pictet Asset Management, which runs a $121.3 million portfolio, by $25 million.

OCERS is also reclassifiying the $64.4 million BlackRock (BLK) dislocation credit strategy, an opportunistic credit investment, as real assets.

In other news, OCERS reported it paid total fees of $179.4 million in 2016, or 132 basis points, up from $133 million or 104 basis points in 2015. However, the 2016 calculation included for the first time "other fees/expenses." Excluding the new category, fees increased to 122 basis points, or by 17%.

Management fees dropped by 6% in 2016, while performance fees increased by 76%.