Investor Base: Closing in on its target

The Los Angeles City Employees’ Retirement System (LACERS) has been closing in on its 12 percent target allocation for private equity in recent months. In 2012 it had a 9 percent commitment when it pledged $166 million to seven funds. This increased to $325 million to 12 funds a year later and $350 million to 18 funds in 2014.

In the first five months of this year, LACERS committed $160 million to eight funds, including $35 million to EnCap Energy X and $10 million to Thoma Bravo Special Opportunities Fund.

In August, it approved commitments of $10 million to 1315 Capital, $10 million to New Water Capital Partners and $25 million to TA Associates XII-A.

The pension fund began investing in private equity 20 years ago with a 3 percent exposure target. As of 31 May, it had committed $3.34 billion to 199 partnerships managed by 103 GPs, posting a net IRR of 11.3 percent and 1.51x since inception. It currently manages $14.22 billion, a $636 million increase from the end of last year.

Portfolio Advisors, a consultancy, has recommended a plan for 2014-15 that would see a total commitment of $325 million-$350 million to 12-15 funds, with an individual size between $10 million-$40 million. At this rate, the pension fund could reach its PE allocation target in three years, or one fundraising cycle.

Most of its private equity portfolio is exposed to US partnerships (72 percent) and buyout funds (62 percent). LACERS is seeking to increase its low and mid-market exposure from 29 percent to 35 percent, and keep its international exposure at 15-35 percent.

Its five largest GPs by total exposure account for 20 percent of all funds. As of 31 December, Texas Pacific Group took the biggest share with $120.8 million, returning 1.73x or 17 percent.

The pension fund pays about $57 million in annual investment manager expenses and fees.