LACERS releases 2019 Q3 private equity commitments

Commitments include new funds from Sunstone, P4G and Montagu.

Los Angeles City Employees’ Retirement System made $135 million in private equity commitments so far in the 2019-2020 fiscal year, according to documents posted on its website ahead of its board meeting next week.

LACERS committed $10 million each to the latest funds from P4G Capital Management and Sunstone Partners, as Buyouts reported. Sunstone Partners closed its second fund at $475 million in October, according to their website.

The other commitment were:

• $25 million to Oak HC/FT Partners III, LP, an $800 million venture and growth equity fund managed by Oak HC/FT that closed in July, as sister title Venture Capital Journal reported.

• $40 million to Montagu VI, LP, a European buyout fund managed by Montagu Private Equity with a $4 billion target, according to a form D.

Two commitments were to funds marked “TBA” on a presentation prepared by consultant TorreyCove. Both closed on October 10. One was for $40 million to a $5 billion large buyouts fund and another was for $10 million to a $750 million medium buyout fund.

These numbers, strategies and timeline roughly match two recently-closed KPS Capital Partners funds, KPS Special Situations Fund V and KPS Mid-Cap Fund, which recently closed at $6.12 billion and $1 billion, respectively, as Buyouts reported.

A KPS spokesperson declined to comment and LACERS did not respond to a request for comment. LACERS did commit to KPS’s previous fund, Special Situations Fund IV.

Last month, TorreyCove recommended LACERS lower its venture allocation and increase its buyouts allocation, as Buyouts reported. It is planning to allocate between $625 million and $675 million to private equity in 2020, as Buyouts reported.

Performance reivew

TorreyCove also prepared a performance review of the PE program for fiscal year 2019, which provided a full breakdown of its private equity program. Buyouts made up 60.7 percent of its portfolio, venture and growth 19.9 percent, credit/distressed 11.3 percent, natural resources 6.7 percent and “other” 1.4 percent.

Its FY19 returns were 10.5 percent over one year, 14 percent over three years, 10.3 percent over five years, 13.5 percent over 10 years and 11.4 percent since inception. All of these lagged the benchmarks, which are the Russell 3000 plus three hundred basis points.

Of the 238 funds in which LACERS is committed, 132 have generated net returns below 12 percent. Forty-four have produced returns in excess of 20 percent, and 34 have produced negative returns.

As of June 30, the $18.1 billion pension’s private equity portfolio’s market value was just over $2 billion. It made up 11.5 percent of the fund’s total portfolio, which is below its target of 14 percent.

Action Item: read TorreyCove’s full presentation on the LACERS private equity program here.