LA Fire boost buyout investments

Los Angeles Fire and Police Pension System is looking to back more buyout funds as it ramps up its commitment to private equity.

Until recently, the city pension fund had allocated 25% of its private equity money to venture capital, 60% to buyouts and the remaining 15% to mezzanine and other diversified strategies. However, the pension plan now intends to scale back its venture allocation to 15%, while ramping up its LBO investments to 70%, a person familiar with the pension fund told Buyouts (a sister publication of PE Week).

Earlier this year, LAFPP set an annual commitment target of $450 million to private equity funds, which would entail backing 10 to 20 partnerships per year. It also raised the size range of a typical commitment, to $20 million to $50 million. The range has been from $5 million to $20 million.

LAFPP, which serves about 21,000 pensioners and has $14 billion in assets, remains well short of its 10% target allocation to private equity, our source said. Of the $1.1 billion the pension fund has committed to private equity funds, about $600 million has been drawn down.

Helping the pension fund ramp up its buyout exposure will be its newly selected nondiscretionary advisors, Aldus Equity and StepStone Group. Dallas-based Aldus advises on about 85% of the pension fund’s alternative investments and will recommend commitments to funds larger than $1 billion. La Jolla, Calif.-based StepStone has a mandate to steer about $100 million over the next year to five to 10 funds managed by emerging managers, smaller firms and regional firms.

Lately, LAFPP has backed many of the big name buyout firms, including Bain Capital, First Reserve Corp., Green Equity Investors and TPG Partners. It has also backed smaller funds, such as Nogales Investors Management and The Gores Group. —Mark Cecil