Los Angeles City Employees' Retirement System on Tuesday adopted a new asset allocation, increasing private equity by 2 percentage points to 16%.
Within public equities, the $21.8 billion pension fund's board also increased the allocation by 1 percentage point to 47%. Within public equities, domestic large-cap equities, domestic smid cap equities and emerging market equities were boosted by 1 percentage point to 15%, 6% and 6.7%, respectively. Non-U.S. developed market equity was reduced by 2 percentage points to 15%.
Fixed income was cut by 2 percentage points to 24%. The fixed-income portfolio changes included a 2-percentage-point increase of private debt to 5.75%, reducing core bonds by 2.5 percentage points to 11.25% and cutting high yield and domestic leveraged loans by a half of a percentage point each, both to 1.5%. Emerging markets debt and emerging markets local currency debt were each cut by a quarter of a percentage point, both to 2%.
LACERS eliminated its 1.2% dedicated commodities allocation, while increasing its domestic real estate investment trust allocation to 1.4% from 1.2%. All of the other sectors within LACERS' real assets allocation stayed the same, resulting in a 1-percentage-point drop in real assets to 12.4%.
LACERS retained its 1% cash allocation.
Separately, LACERS terminated two fixed-income managers, Neuberger Berman, which managed an $856 million active core portfolio, and LM Capital Group, which managed an $353 million active domestic fixed income portfolio.
Both firms had rebid as part of a RFP LACERS launched fin 2019 for core fixed income. Five managers were awarded contracts in January 2021 but neither firm was selected. Neuberger Berman had been one of seven finalists. Staff recommended termination so that it could transition Neuberger Berman and LM Capital's assets to the new managers.
LM Capital said in a statement that executives were disappointed the board terminated its 16-year relationship with LACERS.
"Although performance lagged the LACERS benchmark in 2018, the most recent consultant report to the board showed that LM Capital had far exceeded the benchmark performance goals for all time periods reported," the statement said. The termination decision was based on a 2019 manager search and so the board could not consider its most recent performance, LM Capital noted.
"We look forward to competing for other opportunities with LACERS in the future," the firm said.
Neuberger Berman spokesman Alexander Samuelson declined to comment.