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LADWP sets $400 mln PE pace for 2019

  • Assets under management: $12.3 bln as of June 30, 2018
  • Target allocation to PE/VC: 5 pct
  • Actual Allocation: 4 pct
  • Why this is important: Small pension wants to be active PE investor

Los Angeles Department of Water & Power Retirement Plan intends to commit $400 million to private equity in 2019 and to increase its allocation thereafter, a report prepared by StepStone Group shows.

The report was presented at a Feb. 13 meeting of the pension plan’s board. StepStone is helping the plan step up its PE commitments, targeting an 8 percent allocation over the next several years.

The $400 million will be split between the plan’s Retirement and Health Funds, with the former committing $350 million and the latter $50 million. Each fund will make four to seven investments annually.

The 2019 target represents a significant increase for the plan, which averaged about $125 million in PE commitments per year from 2013 to 2015, and $285 million per year from 2016 to 2018.

The retirement fund and the health fund have been investing in private markets since 2005 and 2008, respectively. PE represents around 4.6 percent of the retirement fund’s assets and 5 percent of the health fund’s, as of September 2018.

The system is seeking more geographic diversity by committing to Europe-focused GPs, as well as selective exposure to Asia and emerging markets.

Venture capital and funds of funds will be underweighted in favor of late-stage and growth-capital commitments. A co-investment program is also envisioned.

In addition to developing new manager relationships and diversifying its PE exposure via growth equity and special situations, the plan will continue committing to “high-conviction” buyout funds, the document said.

Commitments for 2018 included Crestview Partners IV, Harvest Partners VIII, Industry Ventures Special Opportunities Fund III-A, Lexington Capital Partners IX and Vista Equity Partners Fund VII.