San Diego County Employees Retirement Association committed up to $500 million to PIMCO for an opportunistic strategy.
Each investment becomes its own tranche of no more than $100 million per tranche, according to a recording of the Dec. 12 meeting of the $13.8 billion pension fund's board.
Executives at Pacific Investment Management Co. will invest up to $100 million for each tranche in publicly traded vehicles, including commodities, municipal bonds, sovereign debt, bank loans, real estate investment trusts, commercial mortgage-backed securities, convertibles, collateralized loan obligations and business development companies, according to the recording.
The aim of the portfolio is to provide private equity-like returns in a public markets strategy, Stephen Sexauer, SDCERA's chief investment officer, told the board.
Funding will come from reducing a $603 million short-term fixed-income portfolio managed by PIMCO.
SDCERA will pay a 50-basis-point fixed fee only on called capital and a 23% performance fee over a 7.25% return hurdle. PIMCO's short-term fixed-income portfolio earned 2.1% for the year ended Sept. 30 and 1.6% for the five years ended Sept. 30. The portfolio underperformed its benchmark of 2.5% for the one-year period but outperformed its five-year benchmark of 1.3%.