Consultants are steering pension fund clients into leveraged loans and other forms of credit, investments that can cut across asset classes to take advantage of the global need for financing.
Among the investors:
c The $7 billion Michigan Municipal Employees' Retirement System, Lansing, in May restructured its $2 billion fixed-income portfolio, moving all but $770 million into private credit strategies.
c The $1.8 billion Denver Employees Retirement Plan in May invested $50 million in a private senior loan portfolio with Golub Capital.
“Investors are increasingly interested in deploying capital in multiasset class strategies where the manager can make tactical asset allocations to take advantage of market inefficiencies and illiquidity,” said Mark Attanasio, managing partner with Los Angeles-based Crescent Capital Group. The firm is in the process of bringing in a team to start a direct-lending business. Crescent has a strategic partnership with the $25 billion South Carolina Retirement System Investment Commission, Columbia, to invest $750 million in opportunistic credit strategies.
In the past year, investors that had been flirting with leveraged loans and credit investment began defining opportunistic credit allocations and making investments.
Since the 2008 global market meltdown, institutional investors have been providing credit that had been the job of banks and financing companies, said Janine Baldridge, Russell Investments' managing director, alternative investment consulting practice, based in Seattle.
“We have been working with clients who are implementing multiasset, multimanager credit investments in a combination of funds and separate accounts,” Ms. Baldridge said.
Investor objectives for the credit portfolios vary. Some are adding credit as a hedge against rising interest rates and for diversification. Other investors are looking to enhance their portfolio returns, she said.