Florida’s state investment office is looking to take advantage of the “biggest distressed cycle yet,” with eight distressed debt funds in its pipeline of new opportunities.
The State Board of Administration of Florida’s investment advisory council held its quarterly meeting on June 30, where the council discussed how its investments are faring amid the coronavirus pandemic.
Trent Webster, the senior investment officer for the retirement system’s strategic investments team, shared that the strategic investment portfolio is focusing on “all distressed, all the time” in his presentation, published in a packet of meeting documents online.
This is a shift from Webster’s December outlook, which made the case for investing in commodities, including shale oil and gas production, through the strategic investment portfolio.
The strategic investments team has a broad mandate, investing in asset classes like loans, activist equities, infrastructure, commodities, and managed futures, among others. Over the one-year period, the strategic investment portfolio has returned just over 5 percent, beating its benchmark, which lost less than one percent during the same time period, the meeting document showed.
According to Webster’s presentation, the strategic investments team is focusing “most” of its attention on distressed debt right now. Distressed debt currently makes up 10 percent of the strategic investment portfolio, the presentation showed.
During the March 31 meeting, minutes of which were included in the latest set of meeting documents, Webster said that he would not be surprised if, twelve months from that time, the SBA had committed between $2 and $3 billion to distressed investments.
“We think this is probably the best distressed opportunity perhaps ever,” Webster said at SBA’s March meeting, adding that the investment team sees “bang-on-the-table bargains” in credit, senior credit, and senior bonds.
According to Webster’s June 30 presentation, SBA’s strategic investment team is accessing most of the new opportunities through private markets. The team is mainly focused on investments in the United States, but that could change over time, the presentation said.
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Florida SBA isn’t the only retirement system looking at distressed debt opportunities. In April, the Washington State Investment Board said it is looking at the asset class.
And according to data from Preqin published July 2, distressed debt, special situations, and turnaround strategies had a combined $131 billion in dry powder to deploy as of June 2020.