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.