Alternative investment manager Kennedy Lewis Investment Management announced it has entered into a partnership with the California State Teachers’ Retirement System, with the pension fund providing $200 million of seed capital to Kennedy Lewis.
The partnership, announced Tuesday, will focus on senior corporate lending for non-sponsored borrowers. The alternatives manger specializes in credit investments such as direct lending, opportunistic credit, homebuilder finance, core lending and broadly syndicated loan strategies, according to the announcement.
New York-based Kennedy Lewis is active in collateralized loan obligations, homebuilder finance and syndicated loans, and it manages a business development company.
In March, CalSTRS staff finalized a plan to increase the fund’s allocation to its fixed-income portfolio by 2%, specifically to private credit with a focus on direct lending. More broadly, in May 2023, the pension giant announced a new asset allocation plan featuring a 4% reduction in equities and the 2% fixed-income boost, plus a 1% increase to private equity and inflation-sensitive assets, respectively.
In May 2024, the CalSTRS board approved a further 1% increase in the allocation to fixed income, effective in July, with the bulk of the increase going to direct lending. As a part of a long-term strategic asset allocation plan, CalSTRS increased its fixed-income target weight from 12% to 13% to support an increase in allocation to direct lending, funding the move with a further 1% reduction in its exposure to equities.
As of December 31, 2023, the total assets under management for CalSTRS’ private credit investments was approximately $7.5 billion.
“There is currently an extremely compelling opportunity set that is complementary to sponsor-backed lending mandates within the non-sponsored direct lending space,” said David Chene and Darren Richman, co-founders and co-managing partners of Kennedy Lewis, in a statement. “We see the potential to achieve diversification across industries and secure beneficial terms and pricing.”
CalSTRS manages $337.9 billion in assets for more than 1 million beneficiaries. Kennedy Lewis, founded in 2017, manages $16 billion across its business units.
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Tags: California Teachers’ Retirement System, CalSTRS, Darren Richman, David Chene, Kennedy Lewis Investment Management
