New Jersey’s State Investment Council last week voted to commit a total of $350 million to two hedge funds and a private equity fund.
The Garden State is committing $125 million to the PIMCO Distressed Mortgage Fund and a $100 million to the Centerbridge Distressed Credit Partners Fund. PIMCO, which currently manages $693 billion in fixed-income assets, is raising the Distressed Mortgage Fund “to take advantage of the opportunities they see resulting from the current dislocation in the mortgage market,” according to an internal memo from William Clark, director of the division of investment. The PIMCO mortgage team is headed by Dan Ivascyn and Scott Simon, the co-portfolio managers of the Distressed Mortgage Fund.
Clark said the fund will seek to exploit pricing inefficiencies arising from a supply/demand imbalance in the market for mortgage-related assets, including residential and commercial mortgage-backed securities, various tranches of MBS collateralized debt obligations, single-name and index credit default swaps on CDOs, and whole-loan packages. It is a buy-and-hold strategy “designed to capture the premium earned from providing liquidity to forced sellers.”
“PIMCO will diversify fund assets across approximately 300 securities, with a maximum exposure to any single asset of about 5%. PIMCO expects the fund to exhibit annualized volatility of about 8%,” Clark wrote.
Centerbridge Partners currently manages a $3 billion private equity fund (to which the division has committed $80 million) and is in the process of launching a $1.5 billion hedge fund focused on distressed investments, according to Clark. Centerbridge’s new fund is a distressed securities hedge fund focusing on “non-control distressed securities and undervalued credit investments such as leveraged loans, high-yield bonds, specialty financings, structured products and credit-related equities.” The fund will invest in 20 to 30 positions.
In addition, the state is making a $100 million private equity commitment to WLR Recovery Fund IV, a buyout fund targeting “out-of-favor industries” such as auto parts, textiles and financial services and distressed companies.