Pension fund also makes 2 commitments, hires cash overlay manager
LACERA has launched two RFPs for factor-based equity and syndicated bank loan managers, and is expected to issue a third for illiquid credit managers in the next two weeks, said Jonathan Grabel, CIO for the $56.6 billion pension plan.
LACERA will be evaluating firms that offer U.S. equity and/or non-U.S. equity factor-based separate accounts. More than one manager is expected to be hired.
The factor-based strategy is new and the mandate is for 15% of the global equity portfolio of the Los Angeles County Employees Retirement Association, Pasadena, Calif. In February, the board of investments approved reorganizing its global equity portfolio into three groups: 60% in passive, 25% active and 15% in factor-based strategies. LACERA had $13.4 billion in U.S. equity and $12.2 billion in non-U.S. equity as of Feb. 28. Some 43% of total assets were invested in domestic and international public equities as of Dec. 31. Funding came from reorganizing its global equity portfolio that had been 52% U.S. equities and 48% non-U.S. equities.
Pension plan officials also issued an RFP for managers to run $1 billion in a syndicated bank loan portfolio. The board increased its bank loan allocation to 4% in January. LACERA had 1.5% invested in bank loans as of Feb. 28. The new mandate would bring the portfolio up to 3% of the total plan assets, according to agenda materials for the board's April 10 meeting.
The RFPs area available on LACERA's website. Responses to both searches are due by 3 p.m. PDT May 10, with potential recommendations to the board as early as September or October.
Responses are also due at 3 p.m. PDT May 10, with potential recommendations to the board as early as September or October.
LACERA officials also expect to launch an RFP for an illiquid credit manager for a mandate of up to $500 million. The pension fund is launching the search, in part, because it is currently about $800 million underweight its 12% credit target allocation. Semifinalists could be selected as early as August or September, with potential recommendations to the board in November. The RFP will be located on the pension plan's website.
LACERA also reopened its RFP for firms that offer separate account passive investment management services tracking the MSCI All-Country World Investable Market index. Responses are due by 3 p.m. PDT April 19.
In other action, the board hired Parametric Portfolio Associates to manage passive cash overlay services. The selection was made following an RFP launched in November. Parmetric will manage only the excess cash above the pension fund's 1% cash target allocation
LACERA also selected AlphaEngine Global Investment Solutions to run a "paper" active cash overlay portfolio on the total fund for six months. AlphaEngine was identified as a manager that could possibly add value to the pension fund's rebalancing practices during the RFP process. After six months, AlphaEngine will be invited to present the results of running the paper portfolio to the board. In the interim, staff will continue its due diligence on the firm.
Also, LACERA committed up to $150 million to TA Associates XIII, a middle-market growth equity fund. Pension fund officials also reaffirmed its up to $75 million commitment to Vinci Capital Partners III, a private equity investment managed by Vinci Partners focusing on a Brazilian middle-market buyout strategy, targeting primarily consumer-related and industrial companies.
LACERA's private equity consultant, StepStone Group, assisted.
The board also terminated its search for a fixed-income emerging manager while it updates its emerging manager policy, Mr. Grabel said. A new RFP is expected to be issued once the update, which began April 10, is completed.