Municipal Employees’ Annuity and Benefit Fund of Chicago Dives into Private Debt

By David G. Barry


The Municipal Employees’ Annuity and Benefit Fund of Chicago (MEABF) has added private debt to its portfolio.

The MEABF board voted to work with three managers in the sector, allocating up to $100 million. It approved up to $40 million to both Partners Group Credit Strategy and Angelo Gordon Direct Lending Fund and up to $20 million to Brightwood Capital Fund, Stephen Wolff, MEABF’s investment officer, tells Markets Group.

Those three managers were among five that were considered at an MEABF investment board meeting earlier in August. The focus, said Wolff, was on finding direct lenders. Blue Owl Rock Diversified Lending Fund and En Trust Blue Ocean Onshore Fund were the others considered, but not selected.

Wolff said that the MEABF board approved a dedicated allocation to private debt of 4% in early 2021 and that this search fulfilled the allocation. MEABF had $3.4 billion in assets as of July 31. He said MEABF has in the past had mezzanine investments but has not had a dedicated allocation to private debt.

The allocation to private debt is part of MEABF’s “longer-term asset allocation that we are working towards,” Wolff said. The increased allocation to private debt will ultimately be funded by a lower allocation to public fixed income and to a lesser degree a smaller real estate allocation, he said.

As of Dec. 31, MEABF had a fixed income target allocation of 25% and an actual asset allocation of 21%. Its real estate target was 10%, just above its actual asset allocation of 9%. Domestic equities are its largest segment with a 26% target and a 26% allocation. International equities were at 18%, just above its 17% target. Hedged equities, meanwhile, were at 12%, above its 10% target, while private equity was at 3%, below its 5% target.

Established in 1921, MEABF provides disability and retirement benefits to qualified employees of the City of Chicago and the Chicago Board of Education – specifically those who do not contribute to another City of Chicago annuity fund (Firemen’s Fund, Policemen’s Fund, Laborers’ Fund) or to the Chicago Teachers’ Pension Fund.

As of Dec. 31, the funded ratio based on the actuarial value of assets over the actuarial accrued liability was 22.0%, compared with 22.3% as of Dec. 31, 2020. For the year ended Dec. 31, 2021, the actuarial value of MEABF’s assets was $4.04 billion and it had an actual return of 9.7%.

Wolff joined MEABF in November as its top investment staff member, replacing Steve Yoon, who left last summer to become an investment officer with the Illinois Police Officers’ Pension Investment Fund. Wolff previously held roles with Northern Trust Corp., Illinois Municipal Retirement Fund (IMRF), New Jersey Division of Investment and Indiana Teachers’ Retirement Fund.