Kentucky Retirement sets aside $500m for private debt

The Frankfort-based Kentucky Retirement Systems (KRS) is accessing direct-lending financing opportunities structured for middle-market companies across a variety of industries with a new $500 million allocation to a well-known Chicago private equity fund of funds. Adams Street Partners latest private credit offering has gotten buy in from KRS with a $250 million commitment for the Adams Street Partners Private Credit Fund II and another $250 million allocated to a co-investment sidecar vehicle. The $38 billion firm launched its private credit business back in 2016 with the hiring of Oaktree Capital Management’s Bill Sacher and Shahab Rashid. The firm now handles $1.2 billion in investable capital in private credit and has more than 250 investors. According to meeting materials, KRS did not invest in the firm’s first private debt fund opting to monitor its progress of the first fund that has 29 loans currently. Pension staffers visited Adams Street’s offices in early 2019 to conduct due diligence. Staffers for the $13 billion pension fund say that the Adams Street’s position of being one of the largest and oldest private equity funds of funds in the world has afforded it one of the most extensive databases of portfolio company operation metrics that gives the team a distinct advantage when evaluating potential loan opportunities. KRS is occupying one of two “anchor investor” positions in the new fund, which affords the pension system preferred pricing and a position on the limited partners advisory committee. The investment is funded from a combination of Kentucky’s existing public bank loan investment and its global total return bond mandate that are housed within the system’s growth allocation. The system has a $2 billion allocation to opportunistic fixed income including allocations to Cerberus Capital, ArrowMark, Marathon, Shenkman Capital, Waterfall and White Oak. Wilshire Associates is the systems’ investment consultant.

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