LACERA plans $1.5 bln for PE in 2017

  • New commitments may target emerging markets, niche strategies
  • Commitment pace could go as high as $1.8 bln
  • PE portfolio netting five-year annualized return of 12.7 pct

Los Angeles County Employees Retirement Association greenlit an investment plan that will allow around $1.5 billion of private equity commitments in 2017, spokeswoman Linda Ghazarian said.

LACERA sets loose parameters around its commitment pace to account for changing market conditions or reduced allocations to certain funds. At year-end, the retirement association likely will have committed $1.2 billion to $1.8 billion to the asset class, a copy of the investment plan made available to Buyouts shows.

The retirement association may use its annual PE allocation to bulk up its exposure to underrepresented sectors, strategies and geographies, the investment plan says. The plan mentions emerging-market investments in agriculture, credit, co-investments and agricultural assets as possible areas of focus.

Within emerging markets, the LACERA investment plan notes Southeast Asia, India and Africa as possible areas of interest.

“LACERA’s exposure to the three regions with the highest growth prospects (South East Asia, India, and Africa), which account for 3 billion people and $6.3 trillion (8.5 percent) of aggregate GDP, stands at $45 million or 1.1 percent of the portfolio,” according to the investment plan.

Los Angeles County committed $265 million to internationally focused buyout and venture funds in 2016, the investment plan says. The largest of those commitments, $150 million, went to MBK Partners’ $4.1 billion fourth fund.

LACERA’s 2017 commitment pace will enable the retirement association to maintain its 10 percent target to the asset class, according to the plan. The PE portfolio represented 9.3 percent of its assets as of June 30.

Roughly 75 percent of Los Angeles County’s $4.5 billion private equity portfolio is in U.S. investments, and more than 75 percent is invested in buyout strategies, according to the plan. Leveraged buyouts accounted for more than $1.4 billion of the $1.58 billion the retirement association committed to 2016 vintage funds.

Los Angeles County valued its investment portfolio at $48.1 billion as of June 30, according to its annual report. The portfolio generated a five-year annualized return of 12.7 percent as of that date, exceeding its benchmark — the Russell 3000 plus 500 basis points — by roughly one-third percentage point.

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