Los Angeles City Employees' Retirement System committed up to $25 million to middle-market private equity fund Palladium Equity Partners IV, managed by Palladium Capital Management.
The fund's target is $800 million for buyouts in companies that focus on the U.S. Hispanic market; the fund's hard cap is $1 billion. The commitment was made under a discretionary mandate of LACERS' private equity consultant, Portfolio Advisors. LACERS previously committed $10 million to Palladium Equity Partners III, which is currently winding down.
Separately, the board will decide at Tuesday's board meeting whether to reduce its U.S. equities exposure by 7%, or roughly $950 million, to cure an overweighting to the asset class, according to agenda materials of the $13.5 billion pension fund's board.
Currently, LACERS' actual allocation to U.S. equities is 36% compared to a target allocation of 24% and a range of 19% to 29%. According to a proposal of LACERS' general investment consultant, Wilshire Associates, 6 percentage points of the reduction would be invested in international equity and the rest would be allocated to credit opportunities portfolios. Currently both asset classes are underweight their target allocations of 29% international equity and 5% credit opportunities. LACERS' actual investment in international equity was 23.1% and credit opportunities, 1.5%, as of March 31.
Another part of the Wilshire proposal would amend LACERS' investment policy statement, stating that future private equity allocations will be funded by a reduction in U.S. equities. The current investment policy does not address a funding source for private equity commitments.