By Muskan Arora and Lauren Bailey
The $2B Dallas Police & Fire Pension System has earmarked $30M for its private credit sleeve in 2025.
During a recent board meeting, the Dallas PFPS’ consultant, Albourne, recommended the plan restructure its private markets portfolio. As part of the restructuring, the pension plan approved two allocations of $15M each (with the potential to move up to $30M) to the Golub Capital Direct Lending Fund and Kohlberg, Kravis & Roberts Inc.’s Enhanced U.S. Direct Lending Evergreen Fund.
The Golub fund focuses on originating newly issued, first-lien, senior secured loans to healthy U.S. upper-middle-market companies backed by private equity sponsors. “This fund may be suitable as a core allocation for investors seeking a core to upper-middle-market senior lending exposure in an evergreen format,” noted a memo by Albourne.
The consultant also noted the KKR Enhanced U.S. Direct Lending Evergreen Fund is suitable for investors seeking a lower-fee option to access “vanilla upper-mid-market, sponsor-backed senior lending in an evergreen structure.”
As of April 30, private credit comprised 0.1% of the plan’s total portfolio against a target of 4%.
Additionally, the plan, on the recommendation of Albourne, has approved an annual pacing plan commitment that will meet its private equity target allocation of 6% over a period of five years. As of April 30, the plan’s private equity allocations made up 2.1% of its total portfolio.
The schedule is designed to generate long-term expected returns that significantly exceed the assumed rate of return to offset the illiquidity premium associated with making private market investments. The portfolio would initially be skewed toward a more conservative allocation, with secondaries making up a significant portion of the portfolio early on to quickly ramp-up exposure and mitigate the early negative impacts of the J-curve.
The MSCI ACWI IMI plus a spread of 200 bps, on a one quarter lag basis was selected as the benchmark to represent the target return for the portfolio.
