LA County pays $43 mln in fees for PE funds, portfolio generates 23.5 pct return

  • Annual report discloses only $4.5 mln in fees
  • Report does not include management fees included in capital calls
  • PE portfolio surpasses benchmark by 1,020 basis points

The report only took into account the management fees that were not included in capital calls made by fund managers, Kushner said. Because most of LACERA’s fund managers include the management fees in the amount called for investments, a majority of those fees were not included in the annual report’s final tally.

“It is my understanding this number only reflects those fees paid directly from the Trust. As most of the fees are paid in the form of capital calls, they are tracked separately. Our best estimate for fees paid in FY 2014 is approximately $43.1 million,” Kushner said in an email.

The estimated $43.1 million still represents a significant discount from what LACERA would owe its managers if its portfolio were less mature. LACERA has been an active limited partner since the late 1980’s, and many of the funds in its portfolio now charge reduced or zero management fees.

At roughly $4 billion, Los Angeles County’s private equity portfolio ranks among the largest held by a public pension in the U.S, according to its annual report. Los Angeles County had an 8.2 percent allocation to private equity as of June 30, according to its annual report.

The retirement association boasted strong returns for the fiscal year ending June 30. Elevated valuations and a favorable environment for initial public offerings drove the portfolio’s 23.5 percent return on the year, surpassing its targeted return by 1,020 basis points, according to its investment report.

“There were significant liquidity events and write-ups during FY 2014. I do not believe one-year performance in this asset class is an appropriate measure. In our review of the program, we focus on the 10 year and longer performance metrics,” Kushner said in an email.

Correction: The headline for this story was changed because the original wasn’t clear