FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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INVESTMENT OPTION 4-B<br />
r<br />
• Option 4 – B: Private Credit (Continued)<br />
• Benefits<br />
o<br />
Limited exposure to interest rates – return generated through Credit not Duration<br />
o High expected return (8-10%)<br />
o Relatively inexpensive compared to publically traded High Yield debt<br />
o Significantly better risk return pr<strong>of</strong>iles than publically traded High Yield debt<br />
♦<br />
Superior position in capital structure, stronger credit covenants, ability to do workouts<br />
• Drawbacks<br />
o Illiquidity – funds <strong>of</strong>ten have 4-8 year lock-ups<br />
o Pi Private fund structure<br />
t<br />
o High management fees – base and incentive<br />
o Much higher risk investment than traditional core fixed income<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 52
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