Key Takeaways
- • Florida SBA, a $211.5B pension fund, is launching a private credit co-investment program designed to reduce fees and enhance transparency by routing 75-80% of existing manager deal flow through a third-party investment partner who will contribute complementary deal flow.
- • The initiative follows a strategic secondary market exit in which Florida SBA sold 50 limited partner interests in European and U.S. direct lending funds, recycling capital into higher-quality income-generating credit assets and reducing tail exposure tied to equity-like exposures (approximately 25% of sold assets).
- • Six secondary transactions were completed by Evercore just before significant market volatility emerged around U.S. tariff implementation, with Florida SBA management noting the fund would have realized materially lower valuations had the sales occurred weeks later.
- • The active credit portfolio stood at $10B as of July 2025, representing approximately 4% of total fund assets, as Florida SBA pursues broader expansion of its credit allocation strategy.
- • Fee savings and enhanced underwriting visibility through co-investments are expected to be "meaningful," according to John Mogg, senior investment officer for active credit, drawing parallels to successful management fee and carry reductions achieved in private equity co-investment structures.
Summary
Florida's State Board of Administration, managing $211.5B in assets, is advancing plans for a private credit co-investment program as part of a comprehensive repositioning strategy within its active credit portfolio. The initiative, still in planning stages, represents a significant operational shift aimed at optimizing returns and reducing costs across the pension fund's direct lending exposure.
According to John Mogg, senior investment officer for active credit, the co-investment structure will partner Florida SBA with a third-party investment manager, with the pension fund committing 75-80% of deal flow from its existing managers to the program while the external partner contributes supplementary deal flow. The primary objectives are to reduce management fees and carry, improve portfolio transparency, and deepen insights into manager underwriting practices. Mogg noted that comparable structures in private equity have delivered "meaningful" fee savings, suggesting similar value capture is expected in the credit co-investment vehicle.
The co-investment initiative builds on a major portfolio repositioning completed in the second quarter of 2025. Florida SBA executed six secondary transactions through Evercore, divesting 50 limited partner interests concentrated in European and U.S. direct lending funds. This strategic exit was designed to reduce tail exposure and reallocate capital toward higher-quality, income-generating credit assets. Mogg explained that the fund modeled return scenarios and determined the internal rate of return on those positions was "basically capped," making capital recycling economically rational. Approximately 25% of divested assets carried equity-like exposures, further supporting the pivot toward pure credit instruments. The timing of these sales proved advantageous; Mogg noted that had transactions occurred "just a few weeks later," valuations would have declined significantly amid market volatility triggered by U.S. tariff implementation and broader macroeconomic concerns.
As of July 2025, Florida SBA's active credit portfolio was valued at $10B, representing approximately 4% of total fund assets. This scale positions the pension fund to leverage co-investment structures effectively while maintaining diversification across its broader alternative asset allocation. The expansion of active credit—combined with the strategic repositioning through secondaries and the planned co-investment program—signals Florida SBA's commitment to scaling disciplined credit exposure while managing costs and enhancing governance visibility across its direct lending relationships.
According to John Mogg, senior investment officer for active credit, the co-investment structure will partner Florida SBA with a third-party investment manager, with the pension fund committing 75-80% of deal flow from its existing managers to the program while the external partner contributes supplementary deal flow. The primary objectives are to reduce management fees and carry, improve portfolio transparency, and deepen insights into manager underwriting practices. Mogg noted that comparable structures in private equity have delivered "meaningful" fee savings, suggesting similar value capture is expected in the credit co-investment vehicle.
The co-investment initiative builds on a major portfolio repositioning completed in the second quarter of 2025. Florida SBA executed six secondary transactions through Evercore, divesting 50 limited partner interests concentrated in European and U.S. direct lending funds. This strategic exit was designed to reduce tail exposure and reallocate capital toward higher-quality, income-generating credit assets. Mogg explained that the fund modeled return scenarios and determined the internal rate of return on those positions was "basically capped," making capital recycling economically rational. Approximately 25% of divested assets carried equity-like exposures, further supporting the pivot toward pure credit instruments. The timing of these sales proved advantageous; Mogg noted that had transactions occurred "just a few weeks later," valuations would have declined significantly amid market volatility triggered by U.S. tariff implementation and broader macroeconomic concerns.
As of July 2025, Florida SBA's active credit portfolio was valued at $10B, representing approximately 4% of total fund assets. This scale positions the pension fund to leverage co-investment structures effectively while maintaining diversification across its broader alternative asset allocation. The expansion of active credit—combined with the strategic repositioning through secondaries and the planned co-investment program—signals Florida SBA's commitment to scaling disciplined credit exposure while managing costs and enhancing governance visibility across its direct lending relationships.
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