LACERS mulls changes to private equity portfolio

The $12bn system is reviewing a new strategic plan that could see LACERS invest more in distressed debt and consider secondary sales of non-core investments.

The Los Angeles City Employees’ Retirement System is considering a new strategic plan for its private equity portfolio that would involve committing between $325 million and $350 million to the asset class this year, according to pension documents.

LACERS’ private equity consultant Hamilton Lane presented a strategic plan at the system’s board meeting Tuesday that included a number of private equity recommendations, such as investing more in distressed debt, scaling back its investments with mega-funds and considering secondary sales of non-core investments. 

Hamilton Lane recommended that LACERS establish between eight and 12 private equity partnerships in 2013, with an increase in investment size per deal on average of $30 million, according to LACERS documents. LACERS’ average commitment per investment during 2012 was $25 million.

Hamilton Lane also included in its recommendations that LACERS seek attractive emerging managers raising their first or second institutional fund with a size of less than $1 billion.

Last year, LACERS continued to focus on re-ups with existing managers to limit its number of relationships but also sought opportunities outside the US, committing $16 million to SSG Capital Partners II, a pan-Asian fund, and making commitments to two country-specific funds, Apollo Global Management’s AION Fund I for investments in India and FIMI’s Opportunity Fund V for mezzanine investments in Israel.

LACERS has a 12 percent target allocation to private equity and an 11 percent actual allocation as of 31 December, 2012.

The $12 billion system’s private equity portfolio is valued at $1.2 billion, with $2.3 billion in total committed capital. 

LACERS was unavailable for comment at press time.