LACERS acts on $185 mln in recommendations by former PE consultant

  • Why is this important: Major LA pension adopts recommendations from previous PE adviser
  • AUM: $17 bln
  • PE target up to 14 percent from 12 percent
  • Actual allocation closer to 10 percent
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Los Angeles City Employees’ Retirement System at its December meeting reported $185 million in private equity commitments, completing recommendations made by its former PE consultant and bringing total 2018 commitments to $500 million.

The $17 billion system hired TorreyCove Capital Partners as its PE consultant over the summer, replacing Portfolio Advisors.

The system also adopted a 2019 strategic plan aimed at speeding up its PE commitments. The plan aims to implement a new asset allocation, approved last April, that raised LACERS’s PE target to 14 percent from 12 percent. The actual allocation is closer to 10 percent.

During the consultant transition, Portfolio Advisors recommended several commitments that LACERS’s staff still believed in and they completed those commitments under discretionary authority, reporting them to the board in December. TorreyCove provided reports supporting the commitments.

The new commitments included:

  • $40 million to Vista Equity Partners Fund VII, a software-focused buyout fund;
  • $40 million to Hellman & Friedman Capital Partners IX,  a U.S.-focused large-cap buyout fund that closed on $16 billion in October;
  • $40 million to Abry Advanced Securities Fund IV, a distressed-credit strategy focused on PE-backed companies in the media, communications, information and business services sectors, with a $1.5 billion target;
  • $25 million to Baring Asia Private Equity Fund VII, a large buyout strategy;
  • $25 million to Technology Crossover Management’s TCV X Fund, a growth-equity strategy;
  • $15 million to Polaris Growth Fund I, a growth-equity fund focused on tech and healthcare companies in North America. The fund closed on $175 million in August.

All the commitments went to GPs that LACERS had recently worked with.

The $500 million of commitments for the year are a jump from the system’s about $370 million a year in 2016 and 2017 and the average of $285 million a year from 2013 to 2015.

Its 2019 plan calls for $550 million to $575 million in new commitments, with annual increases of $75 million to $100 million in the following years.

LACERS also is rethinking limits on commitment sizes and, for the first time, is considering secondary sales as it conducts a spring cleaning of its PE portfolio.

Action Item: The agenda for LACERS’s next investment committee meeting: