School Employees Retirement System of Ohio made major changes to its private markets allocation at its February 20 Board of Trustees meeting, according to a document on the system’s website.
OHSERS upped its global private equity allocation target from 10 percent to 12 percent. It also created a new private credit asset class which would target 5 percent of its total portfolio.
The space was made by eliminating OHSERS’s allocation to hedge funds, which previously had a 10 percent target. Staff worked with general investment adviser Wilshire Associates to change the allocations.
The total allocation is expected to increase the total fund’s expected return by 14 basis points and its risk by 51 basis points, the document said.
OHSERS already has experience with the private credit space.
“Staff gained experience investing in the space by managing 12 funds with six managers in [OHSERS’s] opportunistic portfolio,” the document said.
The opportunistic portfolio does not have an allocation but can make up to 5 percent of the total fund. Private credit investments make up 2 percent of the total OHSERS fund. These include direct lending and structured/distressed credit strategies.
In February, OHSERS hired Adam Messerschmitt to manage its credit assets.
Messerschmitt is a graduate of the Fisher College of Business at The Ohio State University. He previously worked for Nationwide Insurance’s Investment Management Group.
The private credit allocation will be implemented on July 1, 2020, the beginning of the 2020 to 2021 fiscal year. Current private credit assets will be transferred to the new portfolio at that time. The transition to the new asset allocation will take place over a two-year period.
As of December 31, the fund was valued at $15.24 billion, with 9.5 percent, or $1.45 billion, of that in private equity. Its net return for the calendar year of 2019 was 16.96 percent.
Action Item: read the highlights for the February 20 OHSERS board of trustees meeting here.
Correction: this article has been updated to correct the spelling of Adam Messerschmitt’s surname.