Credit managers are expected to spend the balance of 2020 attempting to take advantage of investors' pivot toward private credit strategies focusing on perceived market stress and distress.
A number of managers are busy raising capital to take advantage of the current market dislocation impacting companies, real estate and infrastructure assets either now or in the future.
Some asset owners are hedging their bets by placing conditions on capital deployment.
For example, earlier this month, the $20.5 billion Louisiana Teachers' Retirement System, Baton Rouge, made an initial $50 million investment in a mortgage-backed securities strategy managed by Principal Real Estate Investors as well as an additional $50 million commitment to the strategy should credit spreads widen.
In June, CalPERS increased its maximum target by 2 percentage points to 5% to opportunistic strategies, a portfolio designed to invest in opportunities such as private credit that arise from extreme market dislocation from a crisis such as COVID-19, said Yu "Ben" Meng, CIO of the $385.2 billion California Public Employees' Retirement System, Sacramento.
Earlier in the year, CalPERS committed $1 billion each to two credit funds — Oak Hill Advisors LP's OHA Black Bear Fund and Oaktree Capital Management LP's Oaktree Latigo Investment Fund — structured with triggers so the mandate would be activated only when a set of conditions was met. The triggers were met immediately thereafter, Mr. Meng said.