San Diego County Employees Retirement Association made an increased commitment of potentially up to 7% of pension fund assets — expected to be about $700 million up from the current $350 million investment — in alternative investment manager Oaktree Capital Management’s high-yield portfolio, according to recently released minutes from the $10.5 billion pension fund’s Jan. 19 meeting.
SDCERA’s current investment in Oaktree’s high-yield portfolio amounts to 3.5% of the pension fund’s total assets. When Oaktree executives determine that valuations are such that they can provide above-average income and capital gains, Oaktree will call additional capital, increasing its allocation to up to 7% of pension fund assets. SDCERA staff can refuse the capital call, but it is expected that they will not, according to a staff report to the board.
SDCERA will pay a management fee of 0.5% paid quarterly in arrears and a 20% performance fee. The expected annual net return is 7.25%.