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Orange County Employees slates $75M for Waterton fund, boosts Beach Point allocations

by trusted insight posted 6years ago 609 views
Orange County Employees Retirement System, Santa Ana, Calif., committed $75 million to value-added real estate fund Waterton Residential Property Venture XII, managed by Waterton Associates, said Robert Kinsler, spokesman for the $12.7 billion pension fund, in an e-mail to Pensions & Investments. 

Waterton’s new fund has a $500 million fundraising target and invests in multifamily properties that are in need of professional management, correction of deferred maintenance, property improvement and capital investment. The fund has already raised about $385 million and made 10 investments. OCERS has not invested with Waterton in the past.

Separately, the investment committee increased its investment to $125 million from $52 million to hedge fund manager Beach Point Capital Management and moved its portfolio with Beach Point to a separately managed account from Beach Point’s flagship credit hedge fund Total Return Fund. The separate account will invest alongside Beach Point’s Total Return Fund. OCERS will receive an increased hurdle rate to 5% from 4%. The hurdle rate is the return the portfolio must provide before the manager may share in profits. The management fee will remain at 135 basis points and the performance fee will stay at 20%.

OCERS also doubled its commitment to real estate debt fund True North Real Estate Fund II to $100 million from $50 million. The fund is managed by True North Management Group.

In other action, the investment committee reduced the real-return portfolio allocations to AQR Real Return Fund managed by AQR Capital Management and Wellington Diversified Inflation Hedges managed by Wellington Management Co. to $15 million to $20 million each, in part, because pension fund officials in April had lowered their real-return allocation to 8% from 10%. In May, Chief Investment Officer Girard Miller used his standing authority under OCERS’ investment policy to reduce investments with these two managers by 50% to about $27 million each.

OCERS also placed Capital Group, which manages a $258 million international equity portfolio, on its watchlist due to personnel changes set to occur in the next 10 to 12 months. David Fisher, a portfolio manager and chairman emeritus of subsidiary Capital Group International, will transition out of the international equity strategy this month. Lionel M. Sauvage, portfolio manager and chairman of Capital International, will retire in November 2015; and Nancy Kyle, portfolio manager and vice chairman of subsidiary Capital Guardian Trust Co., will retire in early 2016.

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