Los Angeles Water and Power Employees’ Retirement Plan’s private equity portfolio is generating negative cashflow of $1.1 billion after another quarter where contributions exceeded distributions.
A slow exit environment has worried many LPs who have less capital on hand to continue funding their programs. LA Water, however, has embarked on an aggressive strategy for its private equity portfolio despite its 10-figure negative cashflow imbalance.
StepStone, LA Water’s consultant, discussed the $19.4 billion pension system’s private equity portfolio at its August 23 meeting. Buyouts reviewed the presentation.
LA Water’s private equity portfolio saw a $37.7 million cash outflow in the first quarter of 2023, with $72.5 million in contributions against $34.9 million in distributions.
The system plans on committing up to $525 million to private equity in 2023. At its August meeting, it announced $475 million in commitments made to five funds.
The largest commitment was $150 million to a fund-of-one managed by Adams Street Partners that will invest in small and mid-market buyout vehicles with sizes between $250 million and $1.5 billion. It is the third fund-of-one LA Water has done with the firm.
Other funds that received commitments were Genstar Capital Partners XI, Industry Ventures Secondary X, Trivest Recognition Fund and Searchlight Capital IV.
Despite the negative cashflow, LA Water’s portfolio appears healthy in terms of valuations, having reported a 14.7 percent net IRR since the system’s inception.
Nearly 75 percent of the system’s commitments since the program’s inception were made to funds with vintage years between 2017 and 2022, according to board documents.
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