LACERS commits $200 mln to PE and venture after increasing pacing target

  • Why is this important: Pension makes progress on higher PE pacing plan for 2019

Los Angeles City Employees’ Retirement System at its May meeting reported $200 million in private equity and venture capital commitments, making progress on a planned pacing increase for 2019.

The commitments put LACERS on track to meeting a 2019 pacing target of $550 million to $575 million. LACERS hired a new PE consultant, TorreyCove Capital Partners, and increased its PE allocation target to 14 percent, from 12 percent, in 2018.

Most of the new commitments went to GPs that were already a part of LACERS’s portfolio. But it did add one new partnership, committing $50 million to Genstar Capital Partners IX, a buyout fund focused on medium and large businesses in the financial services, healthcare, industrial technology and software sectors.

LACERS also committed:

  • $50 million to Harvest Partners VIII, a buyout fund focused on North American middle-market companies in business services, consumer, healthcare services, industrial services and manufacturing and distribution. LACERS previously committed $20 million to Harvest Partners VII in 2016 and has earned a net IRR of 5.3 percent on that commitment to date.
  • €34.9 million ($40 million) to Gilde Buy-Out Fund VI, which focuses on European middle-market companies. LACERS previously committed $24.5 million to Gilde‘s previous buyout fund, in 2016, and has earned a net IRR of 13.6 return on that commitment.
  • $13.25 million to Spark Capital VI, a venture fund focused on digital media and technology companies in the e-commerce, education, financial services and social media sectors.
  • $26.75 million to Spark Capital Growth Fund III, which focuses on late-stage or expansion-stage firms in the digital media and technology sectors. LACERS previously committed to three Spark Capital venture funds and two Spark growth funds, dating back to 2005, for a total prior commitment of $53.75 million.
  • $20 million to Defy Partners II, a VC fund focused on connected software companies. Defy Partners is an emerging manager under LACERS policy, and the pension previously committed $10 million to Defy Partners’ first fund.

LACERS recently approved a new private equity policy that allows the pension to pursue secondary PE sales and make larger commitments than its previous policy.

The $17.3 billion retirement system committed about $320 million to private equity each year from 2015 to 2017, before increasing to $418.5 million in 2018. The 2018 increase came mostly from a larger average commitment size, as LACERS committed to 17 funds during the year, the same number that it averaged from 2015 to 2017.

As of December 2018, LACERS had a $1.88 billion PE portfolio, representing 11.6 percent of its total asset allocation.

Action Item: See TorreyCove’s latest report on LACERS’ PE portfolio performance here