By Muskan Arora

The $337.9bn
California State Teachers’ Retirement System and $16bn Kennedy Lewis Investment
Management, alternative credit firm announced a strategic partnership with a
focus on senior corporate lending for non-sponsored borrowers.

The alliance
includes investments in Kennedy Lewis’ core lending strategy which focuses on investments
in senior-secured, floating-rate loans to middle and upper-middle market
non-sponsored companies, according to a news release on July 9.

While the
investment amount remains undisclosed, CalSTRS has provided seed capital of
$200m to help grow Kennedy Lewis Capital Co., the firm’s perpetual nontraded
business development company.

“There is currently an extremely
compelling opportunity set that is complementary to sponsor-backed lending
mandates within the nonsponsored direct lending space,” said David K. Chene and
Darren L. Richman, co-founders and co-managing partners of Kennedy Lewis, in
the news release.

“We see the potential for
diversification across industries as well as terms and pricing,” he added.

This partnership reflects CalSTRS and
Kennedy Lewis’ mutual confidence in the total returns and diversification
benefits anticipated by non-sponsored direct lending and its attractive features to
a wide range of allocators.

CalSTRS has
about $7.5bn in private credit, and, earlier this year, the pension fund boosted
its fixed income allocation target to 13%, to compliment private credit
portfolio.

In May 2023,
CalSTRS added a 2% private credit allocation, focused on direct lending, to its
fixed income portfolio.