Orange County Employees Retirement System, Santa Ana, Calif., hired Monroe Capital, Crescent Capital Group and NXT Capital to run a total of $110 million in the pension fund's first direct lending strategies, confirmed Girard Miller, chief investment officer.
Monroe will manage $50 million; Crescent and NXT, $30 million each. An RFP was issued in February.
Separately, the investment committee for the $10.5 billion pension fund approved a new comprehensive investment management fee policy that allows OCERS to be able to negotiate fee deals in combination with other government pension plans, among other changes. Mr. Miller said he is working with CIOs in California to adopt the policies and create better pricing power.
“It's an effort to broaden the scope and broaden the discussion” on fees among pension fund executives, Mr. Miller said in a telephone interview.
The main area of focus is on alternative investments. The new policy statement encourages industry adoption of “P-class” shares of institutional funds to encourage lower fees for pension funds. It also brings OCERS' expectations to the forefront for managers. The pension fund previously would select a manager and then negotiate fees afterward. That took away the plan's leverage, Mr. Miller said.
“It moves the fee issue front and center through the whole selection process,” Mr. Miller said. Incumbent managers will also be held to the new policies on fees during biennial manager reviews.
While fees will be the dominant issue for managers that are nearly equal in every other way, they will not be the sole deciding factor if the board is not confident with the abilities of a manager, Mr. Miller said.