Appointment of Fund Manager(s) — Segregated Alternative Credit Mandate.

Descriptions

The Committee of the Fund has agreed to consider an investment in a segregated alternative credit mandate, which will invest in illiquid and liquid higher yielding debt markets. The Committee is seeking to establish a framework agreement comprising a number of alternative credit managers. The framework will be open to other eligible Local Authorities and LGPS funds.The key mandate parameters are flexible and will be agreed upon the appointment of a manager(s). However, the following provides a broad outline:— The framework will be open to other Local Authorities;— The mandate size is expected to be in the region of 100 000 000 GBP - 150 000 000 GBP. This could increase if the framework is used by further eligible participants;— Managers must be able to provide a segregated solution for this mandate (pooled fund solution will not be considered);— Managers and their investment strategy will need to be able to comply with LGPS regulations;— The mandate should target an annual absolute return net of fees of between 10 %-15 %, with minimal/zero use of leverage, through investing in a number of higher yielding debt markets, including but not restricted to:— Direct corporate lending;— Mezzanine debt;— Leveraged senior secured loans;— High yield debt;— Structured credit;— Distressed/stressed debt;— Real estate debt;— Trade finance;— The mandate will be able to invest in illiquid and liquid securities, however there is expected to be a portion of the overall mandate which can be liquidated within 0-3 months with further liquidity grading after that;— It is expected that income will be paid at some point in the near future, we would expect the current proposed portfolio to a have a 5 % running yield;— Exposure to lower yielding investment grade credit markets will be a function of volatility management rather than for income generation;— All currency exposure must be hedged back to Sterling. Limited derivate usage will also be allowed to provide some downside protection through hedging credit risk;— Managers must have proven credentials and track record in investing in a number of the above markets, including experience in sourcing, origination and work-out experience;— Managers must also exhibit superior default and recovery experience, relative to the more liquid public sub-investment grade credit markets;— LPFA reserves the right to exclude funds on certain criteria e.g. significant use of leverage;— LPFA reserves the right to alter the value of the funds awarded, both at outset and at an unspecified point in the future.