LACERS picks TorreyCove as PE consultant, capping year-long RFP process

  • Why this is important: LACERS hired TorreyCove to help the system move forward with its substantial PE program
  • LACERS AUM: $17 bln
  • LACERS PE investments: $1.7 bln, or 10 pct of total
  • TorreyCove AUA: $56 bln
  • LACERS Contactlacers.services@lacers.org 
  • TorreyCove ContactKiersten Pinardkpinard@torreycove.com

Los Angeles City Employees’ Retirement System awarded a five-year contract to TorreyCove Capital Partners for private equity consulting services, capping a lengthy and tumultuous search for its new consultant.

The system’s board of administrators voted 6 to 1 to approve the contract at its July 10 meeting, three sources familiar with the matter said. Board Member Michael Wilkinson voted against awarding the contract to TorreyCove.

The board’s decision comes almost exactly a year after its previous RFP process collapsed at its July 2017 meeting and board members opted to issue a new RFP at a October 2017 meeting, Buyouts reported.

TorreyCove has offices in San Diego and Danvers, Massachusetts, and is led by David Fann. The firm has 23 clients, 14 of which are public pensions, according to a presentation by the firm at the LACERS board meeting in May. The firm had $56 billion in assets under administration, as of Sept. 30, 2017.

Under its contract with LACERS, the firm will source and select new PE commitments.

The total cost for the five-year contract will be $3.7 million, according to LACERS General Manager Neil Guglielmo, who joined LACERS in February 2018. He will execute the contract, which will go into effect in the coming weeks, he said.

The contract with the retirement system’s current private equity consultant, Portfolio Advisors, expires at the end of July.

“We’re very pleased with the board’s approval so we can move forward with a very important contract for our department and make these investments on behalf of our members,” Guglielmo told Buyouts.

LACERS Board President Cynthia Ruiz also welcomed TorreyCove. “After a competitive process, I am confident we have selected the most qualified team to meet our needs,” she wrote in a message to Buyouts. “I would also like to take this opportunity to thank Portfolio Advisors for their partnership over the past several years.”

TorreyCove declined to comment.

TorreyCove was one of two semifinalists considered by the LACERS board.

Investment staff at the retirement system identified Cambridge Associates and TorreyCove Capital Partners as semifinalists for the new contract, and selected Cambridge as the finalist candidate at its May 2018 meeting, on the condition that its fee structure not exceed $4 million over the five-year contract period, according to meeting documents reviewed by Buyouts.

Cambridge was unable to meet the fee limits, however, and the investment team instead recommended TorreyCove.

Not all board members agreed with the recommendation. At the board’s June 26 meeting, some board members advocated for selecting Cambridge, despite its higher fees.

“Some things are worth paying for, and some things we can negotiate,” said an unidentified female board member, according to an audio recording of the meeting.

“If staff agreed and the investment committee agree that Cambridge was No. 1, I don’t want to just pick the runner-up because they’re cheaper.”

The retirement system manages a portfolio of $17 billion, according to a quarterly investment report for the period ending March 31, 2018.

Private equity investments constitute $1.7 billion, or 10 percent, of that total, according to the report.