The $34 billion public fund plans to invest up to $850 million into opportunistic private credit mandates in a drive to ramp up its illiquid asset exposure.
The Iowa Public Employees’ Retirement System (Ipers) has issued a request for proposals for opportunistic private credit products and will consider pitches from Asia-based or Asia-focused asset managers.
The $34 billion fund said on Wednesday (October 7) that it planned to evaluate and select multiple managers to run a portfolio of up to $850 million in size and it has set a deadline of November 10 for bids.
“We will consider all proposals,” a spokeswoman told AsianInvestor by email. “There is neither a restriction on the location of the manager nor on the location of the financed projects or companies. We hope to broaden our private credit portfolio to increasingly include non-US private market credits.”
Ipers does not yet have any exposure to Asia Pacific private credit, apart from a small Australian deal, chief executive Greg Samorajski told AsianInvestor by email.
The Des Moines-based pension plan said it was looking to allocate to separately managed accounts and/or fund structures that invest in any of the following private credit areas: mezzanine lending, special situations, specialty finance, real assets credit, and multi-strategy. The full RFP details can be found on its website.
The mandate “could mean hiring several managers in a variety of private credit strategies that will enhance the breadth of our overall portfolio”, Samorajski said in a statement.
PRIVATE MARKET PUSH
And more RFPs will follow soon. The fund will invite bids for commercial real estate private credit and for private real assets – likely infrastructure – in the “next couple of months”, Samorajski said. “We will keep you posted as to timing and size.”
All this follows Ipers’ review of its allocation plan last month, which saw it decide to raise its investment in private credit to 8% from 3% of its total portfolio, or by around $1.7 billion. The fund has also raised its target allocation to private equity to 13% from 11% and that of real assets to 8.5% from 7.5%.
These increases will come at the expense of core fixed income assets, which will fall to 20% from 28% of AUM.
“We plan to shift substantial funds from core fixed income to private credit over the next one to two years,” confirmed Samorajski. “This RFP is an important first step in that process.”
The aim is to boost returns given that US interest rates are now expected to remain even lower for several years following the pandemic.
Ipers is also considering other ways to boost returns, including employing alpha-enhancement strategies such as market-neutral overlays. But it has decided not to proceed with increasing leverage in the fund to make larger investments.
The fund is also considering setting up an in-house investment team and starting to take a closer look at sustainable investment.
This story has been updated to indicate the other allocation plans that Ipers is considering.
Source: ¬ Haymarket Media Limited. All rights reserved.