US. Pension Funds Chase Returns in Private-Market Debt
Retirement funds are clamoring to invest in private-market loans, hungry for an asset that can beat public markets while at the same time throwing off cash to help pay benefits.
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Two of the nation’s three biggest pension funds—those serving public workers in New York and California—have added private-credit allocation targets in the past two years. Across the U.S., state and local retirement funds with private-credit portfolios are expanding them faster than any other alternative investment, from an average allocation of 3% to an average target of 5.7%, according to analytics company Preqin.
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For decades, U.S. pension funds have been scaling back on bonds, bank loans and other types of publicly traded debt as yields dropped. Now the retirement savings of firefighters and school bus drivers are helping fuel an investing boom in private loans to borrowers ranging from private-equity managers overhauling companies to consumers buying on layaway.
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Michael Lombardi, director of credit at the $280 billion New York State Common Retirement Fund, which serves police, firefighters and other public workers, said that he expects to hit the 4% allocation target set in 2020 by the end of this year.
Read more @The Wall Street Journal
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