Pennsylvania pension selects three firms to manage more than $500m

The Pennsylvania Public School Employees’ Retirement System made private equity and alternative credit investments in the last month, while retaining Aksia as a hedge fund and private credit investment consultant to the $56 billion pension. The board approved a £125 million (US$143 million) allocation to Bridgepoint Development Capital IV LP, a private equity fund that is being raised to invest in businesses in the European lower middle market. The latest fund follows the same investment strategy and process Bridgepoint has deployed since 2009 and according to a trustee memo the fund is targeting commitments totaling £1 billion and a hard cap of £1.5 billion. Hamilton Lane assisted trustees with the fund selection. Meanwhile, $400 million was set aside to private credit strategies upon the recommendation of consultant Aksia. In April, PSERS approved the recommendation of a $200 million allocation to Sixth Street Fundamental Strategies Partners (A). Sixth Street Partners is seeking to raise $2 billion in the fund, according to a trustee memo. Last month, Whitehorse Liquidity Partners was awarded $200 million for its fourth fund that is aiming to attract up to $3 billion in new assets. The fund, Whitehorse Liquidity Partners IV, seeks to generate returns via structured liquidity solutions or preferred equity financing in its private credit strategy. Whitehorse estimates the current potential annual market opportunity for global structured liquidity solutions to private equity investors is between $4 billion and $8 billion. Whitehorse derives deal flow from the existing secondary market and believes its product can be additive to the size of the secondary market. In early June, the board retained Aksia as the hedge fund and private credit investment consultant for the next five years. At the end of the first quarter of 2020, PSERS’ best performing asset classes were U.S. long Treasuries that were up 21.5% as the pension system’s master limited partnerships were down by nearly 50% (-48.8%) and diversified commodities lost 26.6% as economic activity came to a standstill due to coronavirus. “If there is a silver lining in this experience for PSERS, it is within those positive asset classes and liquidity,” said Chief Investment Officer Jim Grossman. “They prove how PSERS current investment strategy of diversifying investments across asset classes work to minimize the higher equity exposure, risk and loss we experienced during the Great Recession of 2007-08. This balanced approach of asset management allowed us to score some investment gains and hold the line on losses while maintaining plenty of liquidity to pay members’ benefits without having to sell assets at inopportune times.”

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