Los Angeles City Employees' Retirement System is trimming its expected commitments to private equity to a total of $1.1 billion for fiscal year 2022 from $1.4 billion, said Rod June, CIO for the $22.5 billion pension plan at Tuesday's board meeting.
While not a large change, the smaller total commitment pace recognizes the fact that LACERS' total portfolio is retracting in size, causing its private equity portfolios to be above its target allocation, Mr. June said. LACERS' current asset size is down from $24 billion at year-end 2021.
In May 2021, LACERS increased its private equity allocation by 2 percentage points to 16%. As of Feb. 28, 16.3% of its assets were invested in private equity.
In consultation with LACERS' consultants, the staff is making the small adjustment due to market changes to minimize risk "but not take a knee-jerk reaction," Mr. June said.
Separately, Mr. June reported that one of its emerging markets small-cap managers sold global depository receipts and American depository receipts holding Russian assets in a private sale. The sales reduced LACERS' exposure to Russian assets to 3 basis points from about 6 basis points. LACERS will have to hold the remaining Russian equity and bond assets until the Russian markets reopen.
LACERS lost about 90% of its investment, receiving an average of about 5 cents on the dollar for its global depository receipts, Mr. June said. Of the portfolio's $1.7 million, LACERS took a loss of $1.5 million. The American depository receipts had a cost basis of about $7.7 million with a loss of close to 100%.
The manager thought that it would be better to exit the market rather than wait for the markets to reopen when there could be a large sell-off as many institutional investors would be "running for the gates to sell their assets," Mr. June said.
In other news, the LACERS board also on Tuesday voted to submit a comment letter to the Securities and Exchange Commission advocating for standardized, mandatory disclosure of environmental, social and governance data and urging the SEC to build a mandatory corporate reporting regime for ESG information. LACERS is a Principles for Responsible Investment signatory, and PRI is encouraging signatories to support a March 21 SEC proposal that would require public companies and foreign private issuers in the U.S. to disclose climate-related information.