Los Angeles County Employees Retirement Associations board has directed staff to study the feasibility of internal management of its $7.9 billion in index funds and, separately, to study the feasibility of enhancing fund returns through hedging. Currently, officials at the $27 billion fund do not manage assets internally. In other action, the board selected an apartment specialist manager, Henderson Investors, to run $75 million. The other finalists were Sentinel Real Estate and Allegis Realty. The board also approved an amendment to the securities lending agreement between LACERA and Mellon Trust, granting the chief investment officer authority to accept or reject any of Mellons recommendations on making additions or deletions to the list of eligible countries for securities lending transactions. The amendment also requires Mellon to assess borrowers level of Y2K preparedness as part of its credit evaluation process and to indemnify LACERA against borrower default resulting from Y2K-related problems.