Orange County Employees Retirement System, Santa Ana, Calif., is searching for a manager to run a portfolio “that can favorably exploit the recent meltdown in global petroleum markets,” said Robert Kinsler, spokesman for the $12 billion pension fund, in an e-mail.
OCERS could invest up to $250 million in the portfolio. However, it is a bundled search, allowing other asset owners to participate in the selection process and join with OCERS in a collaborative investment in a portfolio of as much as $1 billion, the RFP said.
Candidates that offer aggregation discounts for a collective of institutional investors will be favored, the RFP states. For example, lower fees and carried interest, or higher hurdle rates for a portfolio of between $300 million and $500 million and even better terms for total commitments from all investors of more than $750 million for equity strategies only.
“OCERS will give strong preference to previously successful bargain hunters in the oil patch, workout specialists, seasoned petro-industry lenders, and experienced development/operating teams with a keen eye on operating successfully in the 'new normal' of petroleum pricing,” the RFP said.
OCERS will consider both private equity and debt/credit strategies.
“We want to be realists here. There is a huge store of capital sitting out there already in distressed debt funds looking for a home, and this year's private equity funds still hold a mountain of dry powder,” said Girard Miller, chief investment officer, in a news release. “So we do not plan to plunge into this dislocated energy industry search blindly to bid up against those folks just to make this the next money pit. We want to see hardheaded, experienced teams who know what they are doing and have concrete plans.”
General investment consultant NEPC is assisting.
“OCERS will give favorable consideration to proposals that offer financial incentives to investors based on the combined assets contributed by public pension plans, other institutional clients of its general consultant NEPC, and other potential affinity groups,” the news release said.
OCERS first collaborative search was when it selected Pantheon Ventures for a private equity portfolio in the first quarter.
The RFP is available on the pension fund's website. Proposals are due Jan. 18, with a pre-bid teleconference for registered bidders on Jan. 9. A selection is expected as early as April.
Separately, OCERS invested between 7% and 10% of its hedge fund allocation, or about $58 million to $83 million, each to two strategies: global macro Alphadyne International Fund, managed by Alphadyne Asset Management, and Black River Fixed Income Relative Value Opportunity Fund, a global fixed-income relative value strategy managed by Black River Asset Management, a subsidiary of Cargill Inc.
Both managers are new relationships for the pension fund.