The $262.5 billion California State Teachers’ Retirement System (CalSTRS) has allocated $1 billion to direct lending firm Owl Rock Capital.
The customized mandate to the New York-based alternative investment firm will focus on opportunistic credit and other diversified lending strategies, Owl Rock said Monday. As of last month, the asset manager has about $20 billion in assets under management.
“CalSTRS is pleased to work with an industry leader such as Owl Rock and views this partnership as an efficient way to generate portfolio returns on behalf of California’s educators,” the pension plan’s Deputy CIO Scott Chan said in a statement.
The deputy investment chief said the mandate is part of the pension fund’s Collaborative Model investment strategy. The staff recommended this approach, aimed at expanding direct investment opportunities through peer partnerships, joint ventures, and other investment strategies, to the board in the 2019 fiscal year. Chan said the fund is focusing on leveraging its partners to reduce costs, increase investment returns, and control risk.
Investors are increasingly taking stock of direct lending opportunities as borrowers look elsewhere from traditional banks to fund projects. Last year, the private debt market grew to a record $812 billion and became the third-largest asset class in private equity, according to data from Preqin.
Last month, wealth manager Credit Suisse and sovereign wealth fund Qatar Investment Authority (QIA) said they would partner to provide secured first and second lien loans to upper middle-market and larger companies in the US and Europe through a joint multibillion dollar direct private credit platform.
Other firms have recently expanded into direct lending. Abu Dhabi sovereign wealth fund Mubadala Investment Company, with roughly $230 billion in assets, and money manager Barings said they would put $3.5 billion in financing for direct lending opportunities in Europe.