Rhode Island adds $320m to alts, touts returns

The $7.9 billion Rhode Island pension system has allocated to unique opportunities in private equity and securitized credit totaling $320 million following its April trustee meeting. Loomis Sayles was hired to manage they pension’s securitized credit allocation, which is roughly $260 million or 3.25% of the overall investment portfolio. According to a presentation from consultant NEPC, Loomis employs a duration neutral value strategy that seeks broad exposure to the investment grade securitized market through a fundamental approach. The firm’s $1.3 billion portfolio invests in agency MBS, CMBS, and non-agency RMBS and was launched in 2006. The $927 million private equity portfolio, meanwhile, received a boost of roughly $60 million with new commitments to Stonepeak Infrastructure Fund IV, which follows on to other Rhode Island investments in Stonepeak II and III as well as a single co-investment that can invest in ether fund. Along with Stonepeak Fund IV, the system added it to its co-investment program and raised the commitment to the co-investment (Stonepeak Master Co-Investment Partners) from $10 million to up to $20 million upon the recommendation of consulting firm Cliffwater. Stonepeak’s infrastructure focus is well established and the firm currently has $18.2 billion in assets under management. According to the firm, the Stonepeak Infrastructure Fund IV will target 15 to 20 North American middle-to larger market infrastructure portfolio companies, requiring greater than $250 million of equity, that may require re-contracting, growth equity, or will have unique counter-cyclical characteristic that are undervalued by the market. In March’s market collapse, the Employees’ Retirement System of Rhode Island found that its crisis protection allocation enacted in 2016 did what it was supposed to do. Rhode Island’s crisis strategy gained 6.5% in March as the overall portfolio declined only -6.7%.The crisis protection strategy is made up of long-duration U.S. Treasury bonds and systematic trend following managers totaling $787 million. “When the State Investment Commission adopted our new investment strategy in 2016, we prepared for an eventual market downturn by including a crisis protection allocation to provide long-term growth over time and stability when markets are challenging,” said Rhode Island Treasurer Seth Magaziner. “The financial markets continue to be volatile and we are monitoring the situation closely, but no matter what happens we remain committed to ensuring that the pension system makes it through this crisis on a strong and stable footing.” Calendar year-to-date through March, the unique strategy returned 15.1% compared to a global stock market return of -21.9% and the state’s total plan declining by just -9.5%.

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