Chicago Policemen's Annuity & Benefit Fund will launch a search Sept. 1 for firms to manage a new income-generating investment strategy.
Aoifinn Devitt, chief investment officer of the $2.3 billion fund, told trustees during an investment committee meeting Monday the search will be unusual because it is “agnostic about asset class,” but does require that managers produce a cash coupon of at least 5% with a seven-year lockup or a cash coupon of at least 10% in exchange for a 10-year lockup with a two-year extension. One or more firms may be hired for the total allocation of between $10 million and $40 million. The full board approved the search on Thursday.
Managers can invest in public and private credit instruments in primary and secondary markets across the U.S. and globally. Equity-based income generating strategies may also be considered.
Applicants may offer strategies that include all of the instruments and geographies in the specified universe or only a small subset, the RFP announcement said.
The RFP excludes the following strategies: dedicated direct lending strategies; master limited partnerships; dedicated real estate equity funds; mezzanine funds; and traditional fixed-income strategies such as bank loan portfolios, high-yield portfolios and emerging market debt portfolios.
“We are casting a wide net because we want to explore a lot of new ideas,” Ms. Devitt said, noting she believes the RFP will generate 30 to 50 responses.
The RFP will be posted on the fund's website Sept. 1 and the deadline for responses will be Oct. 3.
Separately, the board also approved the investment committee meeting's selection of HGK Asset Management for cash management.
HGK edged out five other finalists to win the mandate: City of Chicago Treasurer's Office; Eaton Vance Management; Garcia Hamilton Associates; Lazard Asset Management; and Wells Fargo Asset Management.
Ms. Devitt told trustees during the investment committee meeting that CPABF needs a flexible cash manager to more efficiently manage the fund's fluid cash flow. Cash assets fluctuate from about $500 million just after the city of Chicago has made a contribution to the plan to zero after four months of meeting benefit payments when the funding cycle starts again.