FCPS OPEB trust posts quarterly gains; advisors urge phased private‑credit additions to approach 7.5% target

Christian Sevier of Segal Marco told the Frederick County Public Schools OPEB Trust Fund Investment Committee that the plan’s assets were about $231,000,000 as of Wednesday’s close and that the quarter produced roughly $12,200,000 in investment gains. "That investment gain of 12,200,000.0 translates to a return of 5.7%," Sevier said during the committee’s review of the third‑quarter performance packet covering the period ending Sept. 30, 2025.

Sevier framed the strong results as driven largely by equity markets and interest‑rate moves: calendar‑year returns through September included an S&P 500 advance near 15%, while bonds also produced solid year‑to‑date gains. He said those returns, plus the plan’s asset allocation, explain much of the fund’s recent performance.

The committee spent the bulk of its meeting on the trust’s private‑credit allocation, a relatively new commitment for the plan. Sevier explained that private‑credit reporting uses an internal rate of return (IRR) convention and reported a since‑inception IRR of about 6.6% for the Hamilton Lane series the plan joined earlier this year. The trust’s commitment to that series is $7,500,000, with roughly $2,500,000 called to date and an estimated $5,000,000 remaining to be called as the manager deploys capital.

Sevier presented a pacing study that modeled the path of private‑credit exposure under different future commitments. With only the current commitments, private credit would peak near 2.6% of the total portfolio and then decline as distributions return capital. "With the current commitment, you're not getting anywhere close to the 7 and a half percent," he said, and showed an example scenario in which an additional $10,000,000 commitment to Hamilton Lane’s next fund would raise private credit to roughly 4.5% by calendar‑year end 2027. The study laid out multi‑year scenarios (for example, additional $10M commitments in later years) to approach, but not necessarily reach, the 7.5% policy target.

Committee members questioned pacing, liquidity and risk. Sevier and staff described how Hamilton Lane uses credit facilities to smooth capital calls, that managers typically batch calls, and that a further call might arrive before year‑end or as a larger call in January depending on the manager’s cycle. On risk and protection, Sevier emphasized the committee’s long time horizon, the portfolio’s current mix (about 50% U.S. equities, 13% international equities, 36% fixed income, 1% private credit) and the role of fixed income and cash equivalents as ballast. He noted the plan’s actuarial assumed return is approximately 6.5% and that the committee has not been drawing on trust assets for operating needs.

Sevier recommended a gradual, phased approach to adding private credit so the plan does not over‑allocate during the short fund lives typical of the chosen vehicles. He also noted alternatives—open‑end or evergreen vehicles and more liquid business development company (BDC) structures—could be evaluated later but were not the committee’s immediate recommendation.

The committee did not take a binding funding vote during the meeting. Sevier said the earliest practical next steps would be to consider another commitment at a future meeting (the pacing study flagged making an additional commitment in 2026 as a reasonable minimum in many modeled scenarios) and to invite Hamilton Lane to present an update on performance and the next fund when available. The committee confirmed its next meeting is virtual on Feb. 20 and adjourned.

Votes at a glance: The committee approved the minutes of the Sept. 5 meeting (motion by Renee Milburn; second by Justin Hite; voice vote 'Aye').