Los Angeles pension boosts targets for private equity, debt

The retirement plan also increased its exposure to private infrastructure by 1%, while targets for real estate equity and natural resources investments stayed the same.

The Los Angeles County Employees’ Retirement Association may vote on a new asset allocation that increases its exposure to private equity, a proposal the pension fund’s investment board looked at last month.

Under the proposal, its growth category – global equity, private equity and opportunistic real estate – would decrease from 50 percent of the portfolio to 47 percent, according to May meeting documents. Global equities will take most of the hit, decreasing by 4 percent, while the target exposure for private equity will increase from 9 percent to 10 percent. Opportunistic real estate stays the same at 2 percent.

LACERA’s consultant for the asset allocation recommendation was Meketa Investment Group.

Recent private equity commitments made by the pension include up to €150 million to PAI Europe VII, a European buyout fund managed by PAI Partners, and up to $125 million to Clearlake Capital Partners V.

The new asset allocation would also increase the pension’s exposure to illiquid credit, with a recommended increase from 1.7 percent of the portfolio to 3 percent.

Among the strategies in that bucket are credit hedge funds, real estate debt and private debt. The private credit strategies are focused on higher-returning products: 40 percent mezzanine, 40 percent distressed and 20 percent direct lending.

The overall credit allocation increased from 7.3 percent to 12 percent. Bank loans and emerging market debt increased, respectively, from 1.8 percent and 0.8 percent to 4 percent and 2 percent.

In addition, private infrastructure increased from 2 percent to 3 percent in the real assets and inflation hedges category. Core and valued-added real estate stayed the same at 7 percent and private natural resources and commodities exposure also remained constant at 4 percent.