The Los Angeles County Employees Retirement Association in 2014 increased the amount of money it plans to invest in private equity this year, from $1.8 billion to $2 billion.
Over the next few years, the fund plans to bring its target PE allocation up to 11 percent of its portfolio, up from 8.7 percent in 2014.
But raising the target allocation is easy. Fulfilling it will be more challenging, as many pension funds, including LACERA, found out in 2014.
From the Wall Street Journal:
[LACERA] fell short of its private equity pacing target in a year when a record number of funds reached their hard caps and investors were forced to scale back commitments or were turned away at the door.
“Certain realities exist in the current private equity environment that challenge staff’s ability to effectively deploy $1.8 billion to $2.0 billion of capital annually,” a memo penned this month from investment staff to trustees and reviewed by Dow Jones stated.
That’s how much Lacera projects is needed in private equity commitments each year for it to grow its private equity allocation to a targeted 11% of its portfolio mix in the next four to five years. The pension system had 8.7% of its portfolio in private equity holdings as of Sept. 30. The pension fund has in the past stressed that it does not want to “dilute the quality of general partner relationships nor the thoroughness of the due diligence process just to hit the target.”
Lacera’s combined commitments in 2014 fell short of its projected pacing figure, but reflects the pension fund’s goal “to not dilute the quality of general partner relationships nor the thoroughness of the due diligence process just to hit the target.”
LACERA manages $47 billion in assets.
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