Investor base: New ventures

The Los Angeles County Employees Retirement Association (LACERA) recently approved a new strategic investment plan for private equity for 2015 that shows a renewed interest in the asset class.

LACERA is working with Grosvenor Capital Markets on its private equity investment strategy, and the firm recommended an 11 percent increase in private equity commitments. This brings the total commitment for the year to $2 billion, up from $1.8 billion last year. Not only that, but the pension says it plans to maintain the 11 percent target over the next four to five years.

In addition to the increased target allocation, LACERA wants to broaden the diversification of its investments across the subsets of private equity. Historically, the LACERA’s commitments have been approximately 64 percent to buyouts and 88 percent to US based managers.

During the same meeting at which it approved the investment plan, LACERA also approved a $125 million mandate to Institutional Venture Partners Fund XV. The vehicle is a late stage venture fund, investing in technology and media companies.

This will be the second time the pension has invested with Institutional Venture Partners, underlining its commitment to maintain ties with GPs that perform well.

In its recommendation of the fund, LACERA noted that late stage venture investments have hit new highs, and include better-quality companies than during the last venture bubble market of the dot com era. Bullish indeed.

In its investment plan, LACERA says it sees a dislocation in late stage venture capital owing to the cohort’s years of underperformance: “The market dislocation will ultimately benefit those limited partners that remain committed to the sub-asset class. By establishing a consistent presence in the space, LACERA will seek to maintain relationships with top-tier venture capital managers while building its reputation as an investor of choice.”

In addition to becoming an investor of choice, the fund is also planning big moves outside US borders. According to the plan, LACERA will be seeking new relationships in Asia, Latin America and potentially Africa and Eastern Europe.

LACERA’s moves into private equity highlight a growing trend among LPs to make themselves more diverse, more risky and much more global. As PEI noted in these pages last month, the Canada Pension Plan Investment Board is undertaking a similar effort in 2015. Is this the special ingredient for making up missing yield? Time will tell.