LACERA hikes private equity to 17% as pensions build up exposure

LACERA has also beefed up its secondary and co-investments, with its in-house service that is only in its third year.

Los Angeles County Employees Retirement Association is ramping its target to private equity as it builds exposure through co-investing and expects more secondaries activity as well.

The system’s board hiked its targeted allocation to private equity to 17 percent of total assets, from 10 percent at the Oct. 13 meeting. To build toward the target, the system increased its targeted dollar amount for fiscal 2022 to $2.45 billion from $2.15 billion in 2020.

LACERA is among several US public pension systems that are raising their targets to private equity to make room to build exposure to the asset class in their never-ending search for yield.

“The new private equity target was approved by the board after being presented different asset allocation mixes/return scenarios by their general consultant Meketa,” said Chris Wagner, principal investment officer who oversees LACERA’s PE program.

Back in the fourth quarter of 2018, the LACERA equity committee and board of investment approved the co-investment program, and the first co-investment and re-activation of secondary investments took place in Q3 of 2019.

That will likely continue to expand LACERA’s private equity program. The system also commits 30 percent of each year’s total private equity commitments to co-investments and secondaries.

“From allocator to best-in-class investor, as we previously outsourced co-investment to Morgan Stanley but since have started an in-house service,” said David Chu, senior investment officer for private equity at LACERA.

Since inception, the co-investment portfolio has generated a net IRR of 59.6 percent, net TVPI of 1.3x and a 0.04x net DPI, while the secondaries portfolio has netted a 42.7 percent IRR, 1.5x net TVPI and 0.25x net DPI.

LACERA has committed $640 million across co-investments and secondaries since the program inception.

The LACERA overall portfolio returned 2.7 percent in the month of August and has a total market value of $73.8 billion.

LACERA has committed $640 million across co-investments and secondaries since the program inception.