By Muskan Arora
CIO Jon Putnam of the $27bn Montana Board of
Investments has identified opportunities within private credit and private
investments which have led to a hike in the target allocation at the October board
meeting. The new targets have now resulted in new allocations.
Chasing higher returns, the CIO had hiked the
target range of private credit from 0% to 4% while decreasing non-core fixed
income from 7% to 6%.
“The Private Credit market has increased
approximately 16% annually over the last decade and is now similar in size to
the public high-yield market,” stated the CIO in the October meeting materials.
“Staff anticipates only investing with
managers focused on senior secured lending to manage portfolio risk,” added the
materials.
The reduction in allocations to core fixed income was due to uncertainty around future rates of inflation and the federal reserve’s action alongside a decline in interest rates over the last year, according to the meeting materials.
In November’s meeting, the CIO disclosed new commitments within private equity, real estate and private credit.
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MBI committed $50m each to Deerpath Evergreen Advantage (U.S.), a direct lending fund; natural resources fund Ecosystem Investment Partners V; GoldenTree Tactical Opportunities Fund, a buyout fund; WCP NewCold III, an opportunistic real estate fund concentrating on temperature-controlled storage facilities; and Stellus Credit Fund IV, a direct lending fund.
“Banks are slowly making their way back to
lending to leveraged buyout deals and are competing head-to-head with private
credit lenders,” stated the November meeting materials.
“The industry is on track to hit more than
$800 billion in deal value for the full calendar year,” added the November
materials.
Further, the board committed $50m (£40m) to the U.K. based buyout fund Rubicon Partners IV and $40m to Renovus Capital
Partners IV, a buyout fund.
Real assets returned 6.7% for the fiscal
year ended June 30, against a benchmark of 6.6%, private investments returned
4% against a benchmark of 10.8%, and real estate returned -4.2% against a
benchmark of -12%.
“Long-term performance over 5 years also
improved marginally from last quarter and the program continues to outperform
the benchmark over 10 years,” stated the November meeting materials.
For the system’s three and five year return, ended June 30, the asset pool of the state's nine pension funds
returned an annualized net 4.2% and 8.3%, above its respective benchmarks of
3% and 7.3%.
However, for its one year return, ended
June 30, the system reported a return of 9.1% for its $14.8bn consolidated
asset pension pool which underperformed its benchmark of 9.8%.
