DealStreetAsia had earlier reported that PAG is gathering about $1 billion for Asia Loan Fund IV, which is part of the firm’s direct lending platform that seeks to offer senior secured and mezzanine corporate and real estate financing solutions to firms in Asia.
Direct lending funds typically cater to mid-market businesses that traditional banks are not keen on lending to. According to the 2019 Preqin Global Private Debt Report, direct lending funds had accumulated dry powder worth $109 billion as of June 2018.
The fund’s predecessor, Asia Loan Fund III, had hit its hard cap of $950 million last year. Launched in 2017, the third loan fund had a target of $750 million and was significantly oversubscribed. It secured capital commitments from a dozen LPs, including sovereign wealth funds and pension funds from North America, Australia, and Asia.
SFERS disclosed in a meeting Wednesday that the retirement board approved the investment, which is classified as a senior debt / direct lending investment within the pension fund’s private credit portfolio.
In October, SFERS gained 1.02 per cent, led by strong returns in public equity of 2.52 per cent. On a calendar year basis, public equity returned 20.40 per cent while private equity raked in 10.79 per cent returns. Fixed income, absolute return, and private credit have all posted returns ranging from 5.43 per cent to 7.54 per cent.
It added that investment returns this fiscal year will likely depend on how investors expect policy proposals on tax and regulation to impact the economy, job growth, and corporate profits.
SFERS, an active backer of Asia-focused funds, has an existing relationship with PAG. In July, the pension fund committed $50 million to PAG’s third special situations fund, which has a target of up to $1 billion.
The $30-billion pension fund had also committed $50 million to the PE firm’s third Asia-focused buyout fund that was closed last November at $6 billion, exceeding its initial target of $4.5 billion.