FROM: Don Pierce, Chief Investment Officer
SUBJECT: AS Birch Grove MCA
RECOMMENDATION:
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Approve the creation of a Master Custodial Account (MCA) with AS Birch Grove, subject to final negotiation of legal documents.
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BACKGROUND:
AS Birch Grove Capital (“BG”) a New York based credit firm was founded in 2013 as Birch Grove Capital by Jonathan Berger and Andrew Fink. In 2021, Birch Grove Capital merged with American Securities (“AS”), a private equity firm, to form AS Birch Grove. The combined firm is a $33.8 billion enterprise with AS focusing on the $26 billion private equity business and BG focusing on $7.8 billion credit business.
In 2013, SBCERA invested $30 million in Credit Strategies Fund, a multi-strategy credit fund investing across opportunities in capital structure arbitrage, structured credit, event-driven long/short credit, directional long/short credit, and relative value trades. Fund performance in the first few years of the strategy was below expectations, however results since 2019 are on track and the fund has delivered an annual 9.4%, 9.3%, 10.4%, -13.3%, 15.0%, and 5.5% for 2019, 2020, 2021, 2022, 2023, and YTD 2024.
Since 2013, BG has demonstrated their capabilities across liquid credit, has grown a CLO business, and developed capabilities in private credit. As an early investor, SBCERA has secured favorable contractual terms. Establishing an MCA relationship with BG would allow SBCERA access to the broader capabilities, take advantage of market dislocations, and in general provide greater flexibility in investment consideration and capital deployment while taking advantage of favorable terms offered to SBCERA as an early investor with BG.
COMMITTEE REVIEW:
This item was reviewed by the Investment Committee at its meeting on October 10, 2024, and recommends Board approval with a 3-0 vote. Trustee Basle was absent from the meeting.
BUDGET IMPACT:
Investment Costs are deducted from Net Asset Value.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Prudent Fiscal Management
STAFF CONTACT:
Amit Thanki
ATTACHMENTS:
Exhibit A: AS Birch Grove Presentation