Tennessee Doubles Cap On PE, Distress

Pension System: Tennessee Consolidated Retirement System

Assets Managed: $33 Billion (Dec. 31, 2011)

Private Equity Assets: $133 Million (Dec. 31, 2011)

Private Equity Allocation: <1% (Dec. 31, 2011)

Chief Investment Officer: Michael Brakebill

The Tennessee Consolidated Retirement System, which manages about $33 billion in assets, boosted its cap on private equity and distressed debt transactions to 10 percent of its portfolio, up from 5 percent, according to Michael Brakebill, the pension’s chief investment officer. The rule change was signed by Gov. Bill Haslam.

The system’s private equity allocation was less than 1 percent of assets as of Dec. 31, 2011, or roughly $133 million in invested private equity capital, although the system was rapidly increasing its private equity commitments.

Brakebill said the new cap is likely to be used to allow the system to more easily diversify into a variety of strategic and private debt investments, including distressed debt and high-yield bonds, mezzanine debt and mortgages. He also said it was possible that his office would set aside a pool of money to be managed by a investment firm as part of a separate account, although no final decisions have been made.

“What I don’t have in my tool kit right now is the ability to invest in non investment-grade lending,” said Brakebill. Currently, most of the system’s investment in credit is confined to “plain vanilla” investment-grade debt.

Any new investments, which aren’t likely start until October, are to be managed by Brakebill, Lamar Villere, the director of private equity, and Andrew Palmer, the deputy chief investment officer.

The Tennessee Consolidated Retirement System is advised by Cambridge Associates.