CalSTRS, Kennedy Lewis IM Partner on Private Lending

The California State Teachers’ Retirement System (CalSTRS) announced a partnership with alternative credit firm Kennedy Lewis Investment Management focused on senior corporate lending for non-sponsored borrowers and to seed a Business Development Company (BDC).

In addition to investments in Kennedy Lewis’ core lending strategy, CalSTRS will provide $200 million to support the expansion of Kennedy Lewis Capital Company (KLCC), the firm’s non-exchange traded, perpetual-life BDC.

“There is currently an extremely compelling opportunity set that is complimentary to sponsor-backed lending mandates within the non-sponsored direct lending space,” said David K. Chene and Darren L. Richman, co-founders and co-managing partners of Kennedy Lewis. “We see the potential to achieve diversification across industries and secure beneficial terms and pricing.”

CalSTRS did not reveal the size or timing of its investments in the core lending strategy. Kennedy Lewis also didn’t go into great depth about the assets committed to the strategy.

The $338 billion pension system incorporates private credit in its fixed income portfolio, which totals approximately $35 billion. CMBS takes up 2% of the program, while bank loans account for 3%. According to publicly available investment committee reports, CalSTRS distributed $1 billion to two managers in senior, secured, direct lending strategies in the second half of 2023. The managers’ names were not revealed.

Founded in 2017, $16 billion Kennedy Lewis, which recently received a passive, minority investment from Goldman Sachs’ GP stakes unit Petershill, is known for its private fund offering, BDC business and CLOs.