LPs

LACERS tees up private credit search

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CalPERS, pension fund, private equity
The iconic Hollywood sign overlooking Southern California's film-and-TV hub in Los Angeles on Jan. 1, 2017. Reuters/Kevork Djansezian
  • The $17 bln retirement system is preparing RFPs to meet a new asset allocation policy
  • LACERS will seek niche strategies to provide enhanced return in the fixed income asset class
  • LACERS also remains underweight in private equity

The $17.2 billion Los Angeles City Employees’ Retirement System plans to begin a search for private credit managers soon, seeking to build out a new 7 percent allocation to the asset class.

LACERS has several RFPs coming up after choosing a new asset allocation with consultant NEPC, CIO Rodney June said at the retirement system’s Sept. 11 meeting. LACERS plans to hire managers in several asset classes, including private credit, small-cap equity, small-cap emerging, fixed income, high yield, and emerging market debt local currency. Private credit is a high priority, June said.

“We’re rolling those out, and we’ll try to take care of the high priority searches first, and then we’ll be moving down the list,” June said. “Private credit will be one of the first, because it is a large allocation, between 7 and 8 percent of the total plan.”

LACERS plans to conduct the private credit search in parallel with its public market searches, June said.

“Private credit is something like a private market or private equity-type investment,” June said. “The search process is going to be slightly different because there are certain confidentialities that surround private credit, so that search will be tackled somewhat separately and differently from the other searches that are public market searches.”

The private credit allocation is part of LACERS’ fixed income asset class. NEPC has a positive view of the current private credit market overall, seeing slightly more attractive opportunities in Europe and Asia than in the competitive U.S. market, according to the consultant’s implementation plan. LACERS will seek niche strategies to provide enhanced return in the asset class, according to the plan.

LACERS also remains underweight in private equity, with a 10.28 percent allocation against a 12 percent current target. LACERS had planned to push that allocation to 14 percent, and the additional private equity allocation will be temporarily held in public equity, according to NEPC’s implementation plan.

Action Item: Look for the upcoming RFPs here https://bit.ly/2OC4JWM