April public pension plan commitment summary points:
- Noise around regional and local banks continued to be in the headlines as another notable bank was placed into receivership and swiftly absorbed.
- Lending conditions via the traditional credit/banking system continued to tighten, which has been a goal of the Fed. This however is a benefit to the private credit/debt asset class as these managers are able to fill this void. In turn allocators are entering the asset class at more attractive prices VS a year ago.
- With many asset classes experiencing less volatility outside of financials, the funding level of the top 100 pension funds continued to improve ending at 74.5% VS 73% a month ago according to Milliman.
April was slower across the 80 individual commitments made totaling $6.4 B allocated among 60 individual managers. There were no terminations and 29 individual pension funds made commitments during the month.
The top allocations during the month were:
- Virginia Retirement System allocating $1.575 billion
- LA County Employees Retirement Association allocating $600 million
- NY State Common allocating $600 million
Asset Classes- April’s allocations were allocated more evenly VS other month with Private Equity taking in 34% of commitments, Private Credit rising to second with 24% of commitments, and Real Assets back into the top three taking 21% of commitments. This was the lowest amount allocated to Private Real Estate in over 14 months, due mainly to the large commitments made during 2021-2022 and cap calls being made as we speak.
Sub Asset Classes-Infrastructure was by far the largest sub-asset allocation taking in 20% of commitments, in second Value-Add Real Estate took in 10% of allocations, and P/E Large Buyout took in 9% of commitments in third place. Completely reversing the trend we saw last month, this was one of the narrowest of sub-asset classes allocated to with only 18 being allocated to.
Looking at the top shifts made this month:
- Virginia Retirement System allocated $350 M to the Pantheon Global Infrastructure Fund III, $300 M to the Hellman & Friedman Capital Partners XI large buyout fund, and $250 the recently launched Ares Pathfinder II private credit fund. VRS had focused on infrastructure and direct lending as the main sub-asset classes.
- LACERA had one large allocation of $600 M to the Macquarie Global Infrastructure Fund. Macquarie and Brookfield have been consistent recipients of infrastructure commitments for the past trailing 12 months.
- New York State Common Retirement Fund allocated $300M to Hudson River Co-Investment Fund IV and another $300 M to Cortland Enhanced Value Fund VI ( value add real estate
- Last month we mentioned that a few CLO mandates were made in well over a year, and this month these allocations continue to drip into the CLO sub-asset class. While the floating rate asset class typically sees retail inflows ahead of rate hiking periods and then a rotation back out just as fast, pensions often allocate based on the capital stack preference and duration management.
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