One member of the Los Angeles City Employees’ Retirement System board issued a challenge to the $20.27 billion pension’s staff and consultants at a recent meeting.
“It is vital to me that we ensure that we’re giving women of color an opportunity to sit at the table,” said Nilza Serrano at the close of a November 10 investment committee meeting. “I’m not saying give them contracts, but ensure that they have an opportunity to sit at the table and bring opportunities that can bring alpha to the table. Please.”
In an email, chief investment officer Rodney June told Buyouts it is working with consultants on “possible amendments” to the pension’s emerging manager policy to “enhance LACERS’ ability to attract and possibly fund additional emerging investment managers.” June said the policy should come before the board with several changes early next year.
At its November meeting, the committee took a preliminary look at the 2021 strategic plan for LACERS’ PE program. The plan will aim to invest up to $20 million each to three to five emerging private equity managers next year.
Earlier in the meeting, Serrano had said she pushed to create the committee – which consists of her, board vice president Sung Won Sohn and Elizabeth Lee – because she was frustrated at the lack of diversity in its outside investment managers.
“Emerging managers…never had an opportunity to be at the table, and this was a chance for me to voice my opinion and make sure that consultants and the staff know this is an important issue, that we’re leaving money on the table when we don’t give opportunity to emerging managers,” she said.
The review of the strategic plan touched on many aspects of the pension’s private equity program, including plans to diversify into secondaries and co-investments, as Buyouts reported. It was approved by the full board on November 24.
But another topic of the review was the pension’s emerging manager program, some of the difficulties it has encountered and how to improve it going forward.
Consultants David Fann and Jeffrey Goldberger of Aksia TorreyCove said there was one more emerging manager commitment in the works this year, as well as another one which did not work out because of LACERS’ side letter requirements.
Fann said the problems arose from a California state law requiring fee disclosures, and that the two sides could not come to an agreement. But, Los Angeles Fire & Police Pension System was able to invest in the fund because it uses a fund-of-funds manager that provided a “blocker.”
Fann did not say who the manager was, but he and Goldberger said the fund was woman-owned. Recent woman-owned emerging firms to which LAFPP has committed include Reach Capital and Imaginary. Neither Fann nor June responded to requests to identify who the manager was. But, this could be among the changes offered up in the new policy.
“A fund-of-funds manager will be a part of the discussion among staff and its consultant,” June told Buyouts via email.
Fann and Goldberger also listed several managers in the general private equity program that had ethnically diverse ownership, citing names like Robert Smith of Vista Equity Partners, Orlando Bravo of Thoma Bravo, Ray Whiteman of Stellex Capital Management and José Feliciano of Clearlake Capital Group.
“I’m hearing a whole lot of testosterone and I’m not hearing any women,” Serrano said.
The consultants said the emerging manager they were working on was woman-owned, as was the one they failed to come to terms with. “We’re working hard, we’re going to increase gender diversity as well,” Fann said. “That is an important aspect of it.”
June added via email that LACERS had an active “emerging investment manager outreach program,” which involved attending emerging manager conferences, an “open door” policy to allow for emerging meetings and referral of managers to Aksia for further consideration, among other things.
Serrano did not respond to a request for comment made via LACERS. Fann declined to comment, referring Buyouts to LACERS.