LACERS builds new relationships

The $10.8bn pension system has made first-time commitments to four managers since June as it works to diversify its portfolio and shift exposure from large-cap funds to small and mid-sized funds.

The Los Angeles City Employees’ Retirement System has committed $135.9 million to six managers since June, building new relationships as it moves away from larger-cap managers to focus on small and mid-market funds.

Since August, the system has entered into a series of new relationships with smaller, geographically diverse funds. LACERS committed $20 million to FIMI Opportunity V, targeting $1 billion for investments in the Israeli mid-market; $20 million to AION Capital Partners, a joint venture between Apollo Global Management and ICICI Venture targeting $1 billion; and $15.9 million to SSG Capital Partners II, which closed on its $400 million hard-cap earlier this month.

LACERS also in August made a first-time commitment of $25 million to Platinum Equity Capital Partners III, which is targeting $3.75 billion. Perhaps one of the most significant new relationships LACERS launched was with secondary specialist Coller Capital, committing $25 million to the firm’s sixth fund that closed on $5.5 billion earlier this year.

While forming new relationships, the system also stuck with one of its trusted managers, making a re-up commitment of $30 million to Advent International’s Global Private Equity VII-B, which closed earlier this month on €8.5 billion.

Bringing new managers into the portfolio is part of LACERS’ investment plan that involves developing small, mid-market and emerging market exposure through new relationships, according to an investment report from the system’s private equity consultant, Hamilton Lane. The report was presented to the pension board at the meeting this month.

LACERS has been working to meet its 12 percent target allocation to the asset class. As of June, the system’s actual allocation was 11.7 percent, according to the investment report. LACERS would have to commit between $250 million to $300 million annually to maintain its exposure within the target range, Hamilton Lane said in the report.

Like many other public systems in the US, LACERS had been focusing on limiting the number of manager relationships in its portfolio, as well as adding “tactical” opportunities in sectors like energy, healthcare, distressed investments and emerging markets, the documents said.