LACERS uses emerging-manager program to back Bain social-impact fund

  • LACERS policy: EM firms can’t have more than $500 mln assets
  • Bain had roughly $75 bln of assets
  • New fund targets investments with social, environmental benefits

Los Angeles City Employees’ Retirement System used its emerging-manager program to make a $10 million commitment to Bain Capital’s new social-impact fund, even though Bain’s size exceeds the limits LACERS set for its emerging managers.

LACERS’s emerging-manager policy prohibits firms with more than $500 million of assets from qualifying for a commitment from the program. Bain’s private equity platform, which was founded by Mitt Romney and others in 1984, managed $32.4 billion of client assets as of Dec. 31,  SEC filings show.

Total assets under management, including Bain’s venture and credit platforms, stand at around $75 billion, according to the firm’s website.

LACERS previously committed $15 million to Bain Capital’s third Asian PE fund, which held a final close on $3 billion in 2015, a retirement-system investment memo says.

The $15.3 billion retirement system disclosed Bain’s participation in its emerging-manager program in a memo scheduled to be presented at its July 11 investment-committee meeting.

Bain Double Impact Fund is the firm’s first to specifically target investments in lower-mid-market companies oriented toward clear, positive impacts on environmental and social issues. The fund is led by former Massachusetts Gov. Deval Patrick, a Democrat, and Managing Directors Greg Shell and Warren Valdamis, according to LACERS documents.

It’s unclear how much Bain Capital has raised through its Double Impact Fund, and how much the fund is targeting. The firm registered the vehicle with the SEC last year and Patrick participated in a 2015 deal to acquire Sundial Brands, a producer of skin and hair care products.

LACERS did not respond to requests for comment. Bain Capital declined comment.

Emerging Managers at LACERS

LACERS typically commits $300 million to $350 million to PE per year, with the stated goal of allocating roughly 10 percent of those commitments to emerging managers, according to a Portfolio Advisors report presented to the board late last year. The retirement system established the program in 2012.

In its July 11 emerging-managers report, staff disclosed three emerging-manager commitments totaling $37.5 million in 2016. In addition to its commitment to Bain Capital, LACERS used its emerging- manager program to allocate $7.5 million to Sunstone Partners I, a $300 million vehicle for small-market technology companies, and $20 million to a first-time real estate fund, Asana Partners Fund I.

In the three years ended Dec. 31, 2016, eight of the retirement system’s 53 commitments went to funds raised by emerging managers.

LACERS valued its PE portfolio at $1.5 billion as of March 31. The retirement system has a 10 percent allocation to the asset class against a 12 percent target.

Action Item: For more on LACERS:

The downtown Los Angeles skyline is seen in front of the snow-covered San Gabriel Mountains following a series of storms on  Jan. 7, 2016.  Photo courtesy Reuters/Bob Riha Jr.