State of Michigan Retirement System has invested $100m (€91.6m) in Lone Star Residential Mortgage Fund III, as written by the pension fund in a summary of its commitments during the fourth quarter of 2023.
The pension fund’s investment amounted to just over 15% of the commingled fund’s total capital raise of $657m, according to information provided by Lone Star at the time of its final capital raise.
The fund is managed by Lone Star Global Acquisitions and its investment period is projected to be 54 months.
Michigan is expecting that the fund will invest in non-agency mortgage opportunities on a domestic basis.
The transactions will include investments in newly-originated, performing, single-family residential mortgage loans and related investments. The assets in the fund would be based in the US.
Michigan has placed its investment into its absolute-return asset class. The pension fund has set a value on this portfolio at $10bn until the end of 2023.
The objective of the absolute-return portfolio is to diversify the pension fund’s holdings, targeting returns above investment-grade fixed income with lower volatility than the equity portfolio.
The portfolio has produced a 9.1% one-year return, outperforming the benchmark of HFRI FOF Conservative Index, which produced a 4.1% return.
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