Loath to back LatAm

In May, the Los Angeles County Employees Retirement System told the Latin Private Equity Journal that it planned to allocate 0.7 percent of its private equity portfolio to South American funds. Although this allocation makes up a very small portion of LACERA’s exposure to the asset class, it means LACERA will be one of the first US pensions to invest in the region. 

Some of LACERA’s west coast peers are showing an interest in Latin America, but most have yet to allocate a specific percentage.  

“We are starting to look at the players that are in Latin America, but we won’t do anything immediately,” New Mexico State Investment Council director of private equity Greg Kulka says. 

New Mexico is interested in the private equity markets in Brazil, Chile, Colombia, Mexico and Peru, but remains focused on regional rather than country-specific funds.  

Although LACERA – which did not return several requests for comment – is also considering fund
of funds and regional funds, it reportedly plans to present a Brazil-focused fund to its investment board in the near-term, and commit to one or two managers in the Andean region or Mexico in the next two years.

New Mexico previously invested in a Mexico-focused fund raised by EMX Capital, but did not re-up. “It didn’t have to do with performance,” says Kulka. “It had to do more with fund size. It was too small for us. We’ve gone further up the chain as far as the size of funds we commit to.” 

New Mexico typically invests in funds raising more than $500 million. 

“I really do like the EMX guys and maybe their next fund will be larger. We would certainly look at them again. I think Mexico has great potential.” 

Still, New Mexico doesn’t allocate capital specifically to emerging markets, let alone Latin America. The council invests between 20 percent and 30 percent of its private equity portfolio in international funds and of that, between 10 percent and 15 percent is invested outside developed markets.  

Pensions such as the San Bernardino County Employees’ Retirement Association allocate to emerging markets, but haven’t committed to any managers solely focused on Latin America. SBCERA has a current allocation of 5.6 percent and within that, a target allocation of 6 percent to emerging markets, according to a spokesperson. 

The New Jersey Division of Investments recently partnered with Siguler Guff & Company on an emerging markets mandate, which is expected to include Latin America. But according to director of investments Christopher McDonough, New Jersey hasn’t directly invested in any local Latin American funds either. The same is true for the New Hampshire Retirement System.  

Meanwhile, US pensions including the State Board of Administration of Florida and the Kansas Public Employees Retirement System don’t allocate their commitments by geographies; indeed, the latter focuses primarily on domestic funds. 

Other pensions such as the Tennessee Consolidated Retirement System and the New Mexico Educational Retirement Board are uncertain or declined to comment on future potential investment activities.  

Both the Texas Employees Retirement System and the Washington State Investment Board have previously invested with Advent International and the Southern Cross Group, but neither has a specific allocation for future investments in the region, according to spokespeople. 

So in short: LACERA is a welcome trail-blazer in Latin America. But there’s no obvious sign that other US pensions are eager to follow suit.