- LA Fire and Police Pension expects other LPs to follow lead
- LAFPP also adds GPs who are disabled veterans to mandate
- “First time I have ever seen this,” says one LP advisor
The Los Angeles Fire and Police Pensions will expand its private equity emerging manager program to include funds owned and managed by lesbian, gay, bisexual and transgender (LGBT) investment professionals.
The expansion marks the first time the program included LGBT criteria, said LAFPP General Manager Ray Ciranna. The pension also added language to its request for proposals to qualify funds managed by disabled veterans.
“We’re just trying to be inclusive when it comes to the funds,” Ciranna in an interview, adding that the expanded program will better reflect the city’s diversity. “It’s L.A.,” he said. “We have an open door policy.”
The proposal’s inclusion of firms owned by LGBT investment personnel came as a surprise to several Buyouts sources. While many public pensions use their emerging manager programs to diversify their roster of general partners, this is the “first time I have ever seen this,” said one LP adviser.
“We think it’s an example of the world changing, and changing in a positive [way],” said Paul Thompson, the founder of LGBT Capital, which manages an equity fund that invests in LGBT-friendly companies.
In recent years, internal policy changes at major banks and pro-marriage equality statements from leaders like Goldman Sachs chief Lloyd Blankfein helped transform the financial services industry into a more open environment for LGBT professionals, Thompson said.
“That’s bound then to trickle down to other firms, like private equity firms,” he said. “We’re seeing a lot of examples of that and this is an example of another sector playing catch-up.”
Ciranna said he expects to see other pensions include LGBT criteria in their emerging manager mandates, though it’s more likely to appear in politically progressive regions on “the West Coast or the East Coast,” he said.
LAFPP has not yet determined how much it will allocate to the new mandate, Cirranna said. It previously awarded $60 million to Portfolio Advisors for emerging manager strategies in 2013.
As with the existing mandate, the expanded program will also pursue commitments with firms owned by minorities and women. The mandate will commit to firms raising their first, second or third funds with targets of less than approximately $500 million, according to LAFPP’s criteria.
Los Angeles Fire and Police Pensions began investing in emerging managers across its entire portfolio in the late 1980s, according to its website. The $18.4 billion pension system committed approximately $214 million to private equity managers in that time.
LAFPP valued its private equity portfolio at approximately $1.6 billion as of Dec. 31, according to pension documents. The pension has an 8.8 percent allocation to the asset class, almost 2 percentage points short of its target.
In February, LAFPP finalized a $20 million commitment to Advent International’s eighth flagship buyout fund. The pension also committed $10 million to DFJ Venture XII.
Action Item: To read the relevant investment memos on LAFPP’s new mandate, visit http://bit.ly/1R618PO