TCDRS’ ‘Credit’ class explained

You may have noticed a new name in our asset categories this spring called “Credit”. Credit is comprised of the investments that were previously included in our “High-Yield Investment” portfolio and it plays an important part in our investment strategy.

What is Credit?

The Credit category covers a wide-range of credit‑related securities that we expect to generate higher yields or returns due to risks associated with the issuer, borrower or the securities collateral. The category includes Strategic Credit, Direct Lending and Distressed Debt.
 
TCDRS Chief Investment Officer Casey Wolf says that credit is a broad category, but there are generally two different ways to make money in it: “One, from the income the underlying credit investments produce,” Wolf says. “These investments generally have a contractual obligation to pay out a certain amount on a regular basis.”
 
“The second way to profit is to buy a credit investment at a low price and sell at a higher price,” Wolf continues. “Given the ability to earn money through two different options, this limits the amount of downside risk in the investments.”

Credit’s Role in Our Portfolio

Credit is one of TCDRS’ best-performing asset classes, and it plays an important part in meeting our 8% long-term return goal. These investments carry more risk than investment-grade bonds, but we are compensated for taking that risk with higher returns.
 
To learn more about our assets, visits the Our Assets page.