Florida Pension wants to slash $4B of exposure to private debt

by Silas Brown and Kat Hidalgo

The Florida State Board of Administration is looking to sell a bundle of private credit stakes worth as much as $4 billion in what would be one of the largest deals of its kind, according to people with knowledge of the matter.

The pension fund is looking to offload between $3 billion and $4 billion as it seeks to cut exposure to higher-yielding opportunistic credit and invest more in mainstream direct lending, said the people, who asked not to be identified discussing private matters. The deal may end up being less than that range, and could be broken up into a series of sales where funds have the option of picking parts of the portfolio, the people said.

“The SBA is always evaluating opportunities to reposition investments in the fund, and to shift between strategies when those decisions can optimize our portfolio and maximize return,” Emily Percival, the Florida SBA’s director of external affairs and special projects legal counsel, said in an emailed statement. “As a policy matter, we do not publicly discuss the details of any potential transaction.”

The Florida SBA, which manages state pensions and other funds, aims to double its exposure to direct lending over the next few years, Trent Webster, a senior investment officer at the Florida SBA, said in an investment advisory council meeting in June. Webster also said the fund planned to shed higher-yielding, opportunistic credit stakes. 

At the meeting, Webster said the fund “directionally will be going more into the income-generating and more of what I like to call boring credit.” The Florida SBA has backed many opportunistic credit strategies from firms including Blackstone Inc., Oaktree Capital Management and Värde Partners, according to public filings. 

The pension fund’s decision to offload some of its holdings comes as the market for buying private credit stakes is booming. As much as $15 billion of such sales are predicted to close this year, according to a survey by Ely Place Partners Ltd., which advises firms on these types of transactions.

Firms focused on credit secondary deals including Coller Capital, Ares Management Corp. and Pantheon Ventures have increasingly large pools of capital to buy up such stakes. They’re typically often bought at a discounted price from institutional investors looking to generate some liquidity in the rapidly-expanding $1.7 trillion private credit market. 

Earlier this month, Coller announced the launch of a credit-secondaries fund that will target retail investors. 

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