LACERA Ups Its PE Allocation

The Los Angeles County Employees Retirement Association (LACERA) will up its private equity investments by $600 million, almost tripling its investments in the asset class, according to a new plan adopted by the pension fund’s investment committee last week.

LACERA currently has $370 million, or 5.2% of its assets, in alternative investments, a class that includes private equity. LACERA manages $32 billion.

It is still not known what type of investments LACERA will make, or if it will even define a new investment strategy to go with the new asset allocation. Also unclear is how quickly the pension fund will move capital into the asset class.

Christopher Wagner, LACERA’s senior investment analyst, did not return calls by press time Thursday.

A number of California’s public pension funds have adjusted their private equity allocations in recent months to after years of negative returns and a major deficit clouding the state budget.

For instance, the $370 million Merced County Retirement System’s investment committee voted in August to commit up to 5% of its portfolio to private equity, its first-ever foray in the asset class.

After posting two years of negative returns, Merced County is hoping to clear 12% with its new private equity portfolio.

The California State Teachers’ Retirement System, meanwhile, said it would double the size of its private equity portfolio over the next four to five years, bringing its portfolio up to $8.7 billion.

The Federated City Employees’ Retirement System of San Jose earlier this year launched a search for a private equity fund-of-funds manager for a $35 million investment portfolio.

LACERA suffered losses of 6.2% for the fiscal year ending June 2002, the latest available figures.

LACERA is a limited partner in buyout funds managed by CVC Capital Partners, Madison Dearborn Partners and Thomas H. Lee Partners.

LACERA is also an investor in a fund-of-funds that’s managed by HarbourVest Partners, Landmark Partners and Lexington Partners; mezzanine funds managed by Blackstone Group and Rice, Sangalis, Toole & Wilson; and venture capital funds managed by Apax Partners, Austin Ventures, Oak Investment Partners and Worldview Technology Partners.