LACERA Considering PE Investment Plan –

The Los Angeles County Employees’ Retirement Association (LACERA), which operates a $31.1 billion fund, is considering starting a PE co-investment program to invest $250 million over the next five years.

“We’re always looking at ways to improve the returns and get more bang for our buck,” says Christopher Wagner, a senior investment officer with LACERA’s alternative assets division. “We thought this would be a viable option.”

LACERA issued a request for information (RFI) in late June seeking advisors for the potential program, and has received interest from a large number of firms. Wagner says that the next step in the process is for the investment staff to present information to the board of investments based on program proposals that have been received. There is no set date or deadline for this, but Wagner wants to move forward “as soon as possible.” He expects the board to make a final decision on whether or not to proceed with such a program by the end of the year.

The RFI issued by LACERA asks qualified investment management firms to submit a proposed fee structure based on a $250 million initial program over a five-year period and progressing through growth reaching $500 million and $750 million over an additional five to 10 years.

Direct investment programs are commonplace among limited partners in private equity. Limited partner funds will often invest directly in buyout deals, secondary deals and venture deals alongside the funds they have LP interests in. These deals allow limited partners access to general partner returns.

LACERA manages approximately $31.1 billion in assets and has more than $1.6 billion, or roughly 5.3% of its funding in alternative assets. The retirement association’s alternative assets have $901 million invested in buyout funds, $260 million in venture capital funds, and the rest divided among special situations, distressed and mezzanine debt, funds-of-funds and secondaries.