Los Angeles Fire & Police Pension System will hike its budget for private equity management expenses by 10.5 percent in the 2020-2021 fiscal year, according to a proposed budget approved at its March 19 meeting.
Staff estimates the pension will spend $45.9 million on investment management fees in the private equity asset class out of $114.43 million in total expenses. This accounts for just over 40 percent of all investment management fees for the pension.
“These investment management expenses are reasonable and in line with the growth in the portfolio,” staff said in the budget proposal.
Of the estimated $45.9 million, just under $2 million will go to specialized mandates with Fairview Capital Partners and Portfolio Advisors. The rest will go to partnership fees with individual managers. These fees do not include performance fees such as carried interest, which are usually 20 percent but can go as high as 30 percent.
The budget allocation to private equity fees is a $4.38 million rise from the years before, and are due to “increasing commitments in this space,” according to the budget.
The meeting documents also reported recent commitments of $30 million to Vista Foundation Fund IV, which Buyouts has covered, and $10 million to Material Impact Fund II, as reported by sister title Venture Capital Journal.
As of February 29, LAFPP’s private equity portfolio was valued at $2.5 billion, making up 10.76 percent of its total portfolio. The total fund was valued at $23.58 billion.
The board will vote to approve the final budget in June. The budget will cover the dates July 1, 2020 to June 30, 2021.
Action Item: read the materials for LAFPP’s March 19 meeting here.