Los Angeles City Employees' Retirement System's investment committee is expected to consider as early as November a process for making private equity co-investments, as well as a comprehensive policy on secondary sales and purchases outside of commingled funds.
Both require changes to LACERS' investment policy statement that include clear and streamlined processes, said Rodney June, CIO of the $19 billion pension fund, during a discussion of private equity co-investments and secondary market investments at its Aug. 25 board meeting. LACERS already invests in secondary funds but there is no clear process for investing outside of funds or for making co-investments, he said.
Mr. June also suggested that the board consider, possibly during its asset liability review in 2021, adding an opportunistic asset category where staff and consultant are granted certain discretion to move forward on tactical investments.
During the board meeting, its private equity consultant Aksia TorreyCove Partners said that LACERS should no longer consider selling limited partnership interests in private equity funds on the secondary markets due to expected discounts resulting from the COVID-19 outbreak. The pandemic has created uncertainty about future valuations and write-downs, Jeffrey Goldberger, managing director for private equity at Aksia TorreyCove, told the board, noting that no one knows what the ultimate shape of the recovery will look like.
The uncertainty could result in large discounts to net asset value, especially by forced sellers such as university endowments, which may need to sell limited-partnership interests to fund themselves as a result of shortfalls from fewer students on campus and less tuition, said David Fann, vice chairman of Aksia TorreyCove. That could be a buying opportunity for LACERS.