The $11 billion Kentucky County Employees’ Retirement System (CERS) has approved a significant change within its specialty credit allocation, selecting Oaktree Capital Management to manage its approximately $287 million bank loan mandate across all CERS portfolios. The decision follows a search led by consultant Wilshire, which recommended replacing incumbent manager Shenkman Capital. 

According to meeting materials, trustees determined that Oaktree’s performance profile, risk discipline, and cost competitiveness positioned the firm favorably relative to other finalists. While Ares Management and UBS were also shortlisted, Oaktree emerged as the preferred candidate. Board documents noted that Shenkman’s termination was not a direct reflection of performance, but rather part of a strategic shift to move the mandate toward a pure-play bank loan approach. 

Investment staff at the Kentucky Public Pensions Authority, which oversees CERS, will coordinate with Oaktree to minimize transition costs through a mix of assets-in-kind, cash transfers, or a blended approach. The revamped mandate will be benchmarked to the Morningstar LSTA U.S. Leveraged Loan Index. 

The pension fund’s specialty credit portfolio returned 9.24% for the year ending September 30, according to board documents. 

In addition to the manager change, trustees approved updated language in the system’s investment policy related to co-investments and continuation vehicles. Under the revised policy, any investment decisions involving fund extensions must be brought before the full board for approval. However, in limited situations—specifically when managers offer lower fees and no additional capital commitments are required—trustees may act under an expedited disposition process.