St. Mary's County LOSAP board approves quarter investment report, authorizes search for private‑credit managers

ST. MARY'S COUNTY, Md. — The St. Mary’s County Length of Service Award Program (LOSAP) board on Aug. 29 approved its second‑quarter investment performance report and agreed to begin a manager search for private credit, an illiquid loan strategy the board’s consultant said could modestly boost expected returns and reduce volatility.

Marquette Associates consultant Patrick Ling presented the quarterly performance review, telling board members the trust began the quarter “just shy” of $18.8 million, saw roughly $1.2 million in net investment gains during the period, and ended the quarter “about 20 and a quarter million dollars.” He said total assets reported later in the packet were $21.3 million after an early‑fiscal‑year contribution was deposited.

Ling said the U.S. economy rebounded in the second quarter, citing an initial GDP estimate revised to 3.3% and noting recent inflation readings the Federal Reserve monitors. He described private credit as loans to privately held businesses that are often secured, shorter in maturity than high‑yield bonds and typically floating‑rate — characteristics he said could provide inflation protection and a reduction in interest‑rate sensitivity compared with the trust’s current high‑yield allocation.

“One of the things we talked about in April was that $25,000,000 dollar magic number, right, where you're considered a qualified plan,” Ling said, explaining why the board could not yet access a wider set of private market allocations but could nevertheless consider private credit before reaching that threshold.

Ling proposed replacing the trust's 5% high‑yield allocation with a 5% private‑credit allocation and reorganizing the inflation‑sensitive sleeve (currently REITs, listed infrastructure and TIPS) to include private credit alongside listed infrastructure and TIPS. He presented historical and projected results that showed an expected annual pickup of roughly 20 basis points over long horizons from a 5% private‑credit allocation, together with modestly lower volatility in the modeled scenarios.

Board members asked about liquidity, underwriting standards and ethical concerns. Ling said the consultants would pursue open‑ended private credit strategies rather than closed‑end vehicles that lock up capital for long periods, and he recommended selecting established managers with long track records. He dismissed the idea that the strategy would be directed to predatory lending and said examples presented during a future search would illustrate underlying borrower types.

After discussion, the board approved the second‑quarter investment performance report by voice vote. The board also approved the consultant’s recommendation to proceed with a formal private‑credit manager search to return to the board with candidate managers and implementation details at the October meeting. The board approved a separate set of rebalancing recommendations presented in the packet that trimmed a portion of the non‑U.S. equity overweight and moved cash and proceeds into the real assets and fixed income sleeves.

Votes at a glance
- Motion to approve the second‑quarter investment performance report as presented — approved by voice vote (motion moved and seconded; roll call tally not specified).
- Motion to authorize a private‑credit manager search and further consideration of policy/implementation changes at the October meeting — approved by voice vote (mover/second not specified).
- Motion to accept recommendations for modest partial redemption from non‑U.S. equity and invest proceeds into real assets and fixed income as shown in the packet — approved by voice vote (mover/second not specified).

Why it matters
The LOSAP trust supports length‑of‑service awards for volunteer personnel. The consultant told the board the trust’s funded position has improved materially over recent years because of county contributions and positive markets; the proposed private‑credit allocation is intended to modestly increase expected returns while providing an additional inflation‑sensitive source of income and lower mark‑to‑market volatility than comparable public high‑yield bonds.

What the board asked for next
Marquette Associates will bring a manager search and candidate manager examples to the LOSAP board’s October meeting for further evaluation, including manager track records, example borrower types, proposed fee structures, liquidity terms, and implementation mechanics. The board did not commit to an allocation at this meeting.