LACERA’s Co-Investment Fund Completed

Firms: Los Angeles County Employees’ Retirement System, Morgan Stanley Alternative Investment Partners

Fund: LACERA Private Equity Co-Investment Program

Target: $250 million

Amount Raised: $250 million

The popularity of co-investments got another boost from some well-established industry players. The Los Angeles County Employees’ Retirement Association (LACERA) and Morgan Stanley Alternative Investment Partners (AIP) announced that they have closed the LACERA Private Equity Co-Investment Program, a $250 million pool dedicated solely to co-investments.

LACERA’s Board of Investments approved the New York-based firm’s management of the co-investment program, the LP’s first such initiative. LACERA committed $250 million, but Morgan Stanley and senior investment professionals from Morgan Stanley AIP have committed capital to the fund as well. Morgan Stanley will be responsible for sourcing, investing and monitoring the fund’s investments, which will focus on growth equity and LBO deals and will target direct investments alongside LACERA’s general partners.

The Los Angeles-based LP began its search for a co-investment manager last year. At the time, LACERA was focused on an initial program of $250 million over five years, although the RFI asked interested parties to submit a proposed fee structure for as far as 15 years out with the program reaching $500 million to $750 million in size.

Institutional investors such as LACERA and other public pensions have been more keen to exercise co-investment rights with their own GPs. This allows these LPs to invest and capture returns on larger amounts of funding. The trend comes at a time when institutions are under increasing pressure to utilize set allocations to the asset class and competition for access into top-quartile funds is on the rise.

Morgan Stanley declined to respond to questions asking if there are any other similar programs in the works.

LACERA has approximately $5 billion currently committed to private equity across 102 active funds. As of June 30, its total assets stood at $34.4 billion. Morgan Stanley AIP manages $4.65 billion in commitments in private equity fund portfolios and has 98 active private equity GP relationships. —M.S.