The $122.8B Virginia Retirement System (VRS) disclosed a total $775M in commitments to three credit strategies, signaling increasing appetite in the space.
Within credit strategies, the pension plan is bullish toward distressed, asset-backed, and bank loan strategies, along with high-yield and mezzanine strategies, noted materials from a recent board meeting.
The VRS allocated $275M to HPS investment Partners’ Strategic Investment Partners VI fund, which focuses on mezzanine and other subordinate financing to large corporate borrowers. Last month, BlackRock acquired HPS, a global credit investment manager.
Additionally, the pension plan allocated $250M to KKR IVY III, which invests in reinsurance deals including fixed annuities and life insurance. The fund will be a co-investment alongside KKR’s insurance balance sheet in diversified fixed income and credit portfolios.
It also allocated $250M to Sixth Street Opportunities Partners VI, that is focused on distressed and special situations credit investments primarily in the United States and Europe.
As of August 13, the pension fund had allocated 15%, or $18.5B, to its credit strategies portfolio against a benchmark of 16%. The credit strategies bucket reported a return of 9.1%, one of the top-performing portfolios for VRS in FY 2025.
In December 2024, the pension plan hiked its credit strategies target allocation from 14% to 15% with a range of 8% to 22%, effective from January 1.
The total portfolio returned 9.9% outperforming its benchmark of 9.7%, for the fiscal year ended June 30. For the three-, five-, and ten-year periods ending June 30, 2025, VRS returned 8.6%, 10.4%, and 8.1% respectively, versus benchmarks of 9.2%, 9%, and 7.3%.
Related: https://www.marketsgroup.org/news/vrs-expands-its-appetite-for-credit-strategies
