CalSTRS Allocates $1 Billion to Direct Lending Firm Owl Rock Capital

The mandate includes opportunistic credit and diversified lending strategies. 


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.

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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. 

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CPPIB Continues to Bulk Up on Renewable Energy

Canadian pension giant invests twice as much in renewable energy in 2020 as it did in 2019.


The Canada Pension Plan Investment Board (CPPIB), Canada’s C$434.4 billion (US$327.7 billion) pension giant, continues to raise its bet on renewable energy by more than doubling its investments in renewable energy firms in 2020 to C$6.6 billion, after nearly doubling it the previous year.

The pension fund reported in its annual sustainable investing report that renewable energy investments now make up 1.5% of its entire portfolio, up from 0.76% last year and 0.41% in 2018. As recently as 2017, renewable energy accounted for a scant 0.02% of the fund.

“CPP Investments’ exposure to renewables is aligned with our belief that the energy evolution provides opportunities for attractive long-term, risk-adjusted returns,” CPPIB said in the report.

In March, the fund acquired Pattern Energy Group Inc., a renewable energy company that owns a portfolio of 28 renewable energy projects in Canada, the US, and Japan. It was among the fund’s largest transactions of the year, which had an enterprise value of approximately US$6.1 billion, including net debt.

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“Pattern Energy is supported by a strong management team and offers both a large existing portfolio and potential for growth, with several ongoing projects in development,” said the fund, adding that the firm is also well positioned “to capitalize on opportunities supporting electrical grids in both North America and Japan as they transition from fossil fuels to green energy sources.”

And in May the fund signed a deal with natural gas distributor Enbridge Inc. to acquire 49% of the entity holding Enbridge’s stake in Éolien Maritime France SAS, Enbridge’s partnership with EDF Renewables. The fund said the partnership is developing three offshore wind farms in France, which are expected to become operational between 2022 and 2024. It also said that it expects to continue investing in similar opportunities in the European offshore wind sector through its Maple Power joint venture with Enbridge Inc.

Additionally, the report said the COVID-19 pandemic has reaffirmed its belief in the importance of incorporating environmental, social, and governance (ESG) issues into the investment process. It also said it has a clear preference for ESG disclosures to focus on performance and targets, rather than just policies. It said that when issuers seek the fund’s input, it now indicates a preference for companies to align their reporting with the standards of the Sustainability Accounting Standards Board (SASB) and the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

“We believe that by fully considering ESG risks and opportunities, we become better investors and are able to enhance returns and reduce risk for the fund’s more than 20 million contributors and beneficiaries,” Mark Machin, president and CEO of CPPIB, said in a statement. “Addressing sustainability is not just pressing for society and the planet—it is a business imperative.”

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