Los Angeles City Employees’ Retirement System is considering a policy to allow it to jump on “time sensitive” investment opportunities without board approval.
LACERS’ proposed Unique Investment Opportunities Policy would allow staff to make investments during favourable market conditions with limited windows of time, according to a presentation made at the system’s 26 June board meeting. Affiliate title Buyouts listened to a broadcast of the meeting.
“There are opportunities to be found based on economic dislocation, capital shortages and other situations. There could be extreme valuations and distressed players in the market or a broader structural change,” said LACERS investment officer James Wang.
The proposed policy would allow staff to make commitments without board approval or a competitive bidding process, according to the presentation.
Some board members were concerned about not having oversight on investments made under the proposed policy. LACERS chief investment officer Rodney June agreed to redraft the policy for discussion at a future meeting after a discussion with the board.
“It’s a mystery and I’m not sure what kind of unique opportunities there are going to be,” said board member Annie Chao.
June highlighted investments available under the Federal Reserve’s Term Asset-Backed Securities Loan Facility during the onset of the pandemic as an example of a unique opportunity. TALF helped facilitate the issuance and stabilisation of asset-backed securities that were stressed due to economic disruptions caused by covid.
“We want to find opportunities that have a great upside with little downside, but to capture them means you have to be a fast mover,” June said.
According to the presentation, total investments under this policy could not exceed more than 5 percent of LACERS’ portfolio, currently valued at $22.9 billion. Single investments could not exceed 0.5 percent of the portfolio.
LACERS has a similar policy that allows staff to make up to $150 million in private equity commitments without board approval, according to its investment policy statement.
June said he envisioned this policy to allow for more opportunities in hedge funds and private markets, even with its current private equity policy in place.
“We’re looking for strategies where returns are based on being an early mover,” June said.
According to the presentation, UIO investments would be managed by external managers and could be implemented through separate accounts, commingled funds or “any other suitable investment structure.”
This article first appeared in affiliate title Buyouts.