Ohio Public Employees Retirement System Eyes Private Credit

By David G. Barry

The Ohio Public Employees Retirement System (OPERS) is eyeing a move into private credit.

At the OPERS August Board of Trustees meeting, Chief Investment Officer Paul Greff said the system is not looking to do anything “super dramatic.” Rather, it would look to reallocate capital from its fixed income holdings toward establishing a private credit allocation.

As of December 31, 2021, OPERS had a target allocation of 24% to fixed income in its defined benefit fund – the largest of the three funds that it manages. OPERS ended 2021 with $126.2 billion in assets under management, with $109.3 billion in its defined benefit fund. It also had $14.5 billion in its healthcare plan and some $2 billion in its defined contribution plan.


Greff said the hope would be to bring a plan before the board in November and perhaps have the board take action at its next meeting in January. Given the market slowdown, he said it might be an “opportune time” to get into private credit.

In its 2021 annual report, private credit and infrastructure were identified as two investment sectors that OPERS staff would look to explore in 2022.

Fixed income is OPERS’ largest target allocation, followed by international equities at 23% and domestic equities at 21%. It has a 12% target to private equity and a 11% target to real estate. The board eliminated hedge funds as an investment sector in 2020.


To prepare the board, Greff had system consultant NEPC do a presentation on private credit at the meeting. The takeaways from that presentation are that it’s a huge area – firms are raising some $500 billion annually across the whole sector – and that it represents a means to both enhance returns and diversify a portfolio.

Greff said OPERS’ hope in going into the sector is that it will generate stronger returns. Fixed income, he said, is producing a 4.5% yield. The hope with the private credit allocation is that it would produce 8% to 11% returns. OPERS, he said, is looking at “higher-quality direct lending” most likely in private equity transactions.


Although OPERS does not have an allocation to private credit, Greff said the staff does have experience with the segment.

Deputy CIO DeAnne Mannion, for instance, has overseen an allocation to a floating rate note program. OPERS entered into the joint venture with GE Capital in 2011. The unit that OPERS partnered with is now known as Antares.

Mannion said the investment went well. She said that OPERS had 1% of its assets allocated to the program, the same amount she indicated that OPERS would look to invest in private credit. OPERS, Mannion said, would not be doing a joint venture with this effort.

The business, she said, “is much different than it was 11 years ago.”


OPERS staff, she also said, has been speaking to other systems, including the State Teachers Retirement System of Ohio, about their efforts in private credit.

“We’re not looking to shoot the lights out and take undue risk,” Mannion said.

OPERS at the end of 2021 had a funded ratio of 81.5%.