LA Water pension eyes big PE names as access opens

Los Angeles Water and Power Employees’ Retirement Plan is poised to take advantage of what has been a sluggish fundraising environment as it prepares its 2024 pacing plan.

“You can get into better funds with better managers next year. You’ll also have power when negotiating with different GPs. Look for us next year to recommend to you some phenomenal names while we work with your team to make commitments with good terms,” a StepStone representative said at the pension’s meeting December 13. Buyouts reviewed StepStone’s presentation and listened to a broadcast of the meeting.

LA Water’s $3.4 billion private equity portfolio generated positive cashflow of $6 million in Q2 2023, according to the presentation.

Since inception, LA Water’s contributions have outpaced distributions by $957 million, the presentation said.

“There are some positive directions on distributions. We’re starting to see signs of more liquidity coming back,” the StepStone representative said.

Fundraising may be improving after slowing down since last year. Fundraising boomed in the second quarter as buyout managers raised 25 percent more than the same time last year, according to StepStone’s research cited at the meeting.

Fundraising has slowed over the past few months as many institutional investors remain overallocated to the asset class, face liquidity concerns or are reducing their number of relationships. Through data attributed to Refinitiv, StepStone’s report suggests that fundraising may have found some footing in recent months.

Global private equity fundraising totaled $264 billion in Q2 2023, 37 percent more than the previous quarter and 1 percent more than Q2 2022, according to StepStone.

Buyout managers gathered $210.3 billion in the second quarter, up 46 percent from Q1 and 25 percent from the prior year, StepStone said. Venture capital managers raised $44.3 billion in Q2 2023, double that of the first three months of 2023.

StepStone did not elaborate on fundraising at the meeting. The presentation also did not contain any explanation about the increased fundraising totals.

StepStone could not be reached for comment by press time.

Buyouts’ most recent private equity fundraising report also reflects a similar trend. In Q3 2023, North American buyouts managers raised $153 billion, up more than 54 percent from the previous three months. However, that total was raised by fewer funds, indicating a market where LPs are sticking with their top performers, to the detriment of everyone else.