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Arizona State Retirement preps to place up to $1 billion in private credit

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Arizona State Retirement System, Phoenix, plans to make private credit commitments of up to $1 billion in the fiscal year ending June 30, 2022.

The $49.4 billion pension fund’s investment staff disclosed the plan to increase its net commitments in its credit asset class in a Monday presentation included with investment committee meeting materials.

As of June 30, the actual allocation to credit was 20.5%, just above its 20% target allocation.

The pension fund plans to increase net commitments by up to $1 billion “to maintain pace with the growth in the total fund and maintain an overweight to the asset class,” the presentation says.

Within the credit allocation, as of June 30 individual allocations in relation to the total fund were 14.5% private debt, 3.1% other credit and 2.9% distressed debt.

The pension fund primarily focuses on customized fund-of-one partnerships, with 88% of net commitments in those types of partnerships as of June 30, according to the presentation. Those include a $1.3 billion fund-of-one partnership with Cerberus Capital Management, a separate account that invests in floating-rate secured loans to fund private equity-sponsored middle-market leveraged transactions, and a pending $1.25 billion partnership with Monroe Capital, which would invest in secured loans to run smaller middle-market leveraged transactions.

ASRS spokesman David Cannella could not be immediately reached for further information.