Iowa Public Employees’ Retirement System, Des Moines, hired Western Asset Management to manage about $300 million in the retirement system’s first emerging markets debt portfolio.
Funding will come from the $23.3 billion pension fund’s high-yield fixed income allocation, according to printed summary of the board’s June 21 meeting.
No managers are being terminated; the portfolios of high-yield fixed income managers AEGON Group and Oaktree Capital Management, each managing about $525 million, will be reduced, Judy Akre, IPERS director of communications, wrote in an e-mail response to questions.
The board also approved a staff recommendation to establish a 10% allocation within the IPERS real estate investment program “for private real estate debt to take advantage of current market opportunities,” according to the summary of the board’s actions.
The estimated mandate will be $150 million to $200 million, and the board authorized the staff to issue an RFP in early August to evaluate real estate debt funds and to “further evaluate the risks and rewards” of real estate debt, the summary said.
“We believe there is an opportunity to earn high risk premiums by providing capital as a mezzanine-type lender,” Ms. Akre wrote. “The current and expected demand for capital to refinance commercial real estate greatly exceeds the supply of capital available.”
However, the board noted that if “the opportunity is not worth the risk, then no debt fund managers will be hired and no allocation to real estate debt would be established within the real estate program,” the summary said.
The potential funding source for the private real estate debt portfolio was not immediately known.
Separately, the board approved issuing an RFP between July 9 and July 16 for transition management services. Ms. Akre said BlackRock and State Street have provided such services since 2003, and they are welcome to rebid.
The RFPs will be posted on IPERS’ website, www.ipers.org.
