PE management fees rise by 31 pct at LACERS

  • Management fees exceed $26 mln, up 31 pct
  • Annual commitments to PE remain steady
  • LACERS to focus on small, mid-market in 2017

Los Angeles City Employees’ Retirement System paid $26.6 million to private equity firms as management fees in its 2016 fiscal year, a 31 percent increase from the $20.3 million it paid PE managers in 2015.

The $13.5 billion retirement system held 10.1 percent of its assets in private equity as of June 30, its annual investment report shows. The system has a 12 percent target allocation for the asset class.

Why LACERS’ PE-related costs rose more than $6 million year-over-year is unclear. Its annual commitment pace has remained relatively steady in recent years, with around $300 million to $350 million allocated to new funds each year since 2013, according to a report included in its January board-meeting materials.

In fiscal 2016, LACERS committed $357 million to 20 new PE partnerships, its annual report says.

The retirement system will likely commit a similar amount to the asset class in calendar 2017. An investment plan prepared by consultant Portfolio Advisorsindicates LACERS will commit between $325 million and $350 million to 16 to 18 private equity funds this year, typically allocating $10 million to $40 million per fund.

As in prior years, LACERS will likely direct its focus on buyout-fund managers in the lower and middle markets, according to the Portfolio Advisors plan. The system expects to increase its PE portfolio’s exposure to small and mid-market buyouts to around 35 percent from 29 percent.

LACERS could not be reached for comment.

Action Item: For more information about LACERS, visit www.lacers.org/