Los Angeles City Employees' Retirement System renewed its contract with Granahan Investment Management, which runs a $124 million active U.S. small-cap growth equity portfolio.
The board of the $21 billion pension fund on Tuesday renewed Granahan's contract for three years ended Jan. 31, 2026, even though it's portfolio has underperformed since its inception in September 2020.
Granahan's performance has not been attractive but the manager has been challenged by a shift to value from growth, LACERS CIO Rod June told the board.
What's more, rising interest rates and inflation negatively impacted Granahan's concentrated portfolio of approximately 40 growth stocks, particularly within the technology and consumer discretionary sectors, a staff report to the board said. And a less than three-year track record is insufficient period of time to assess performance, Mr. June said.
Separately, as part of his CIO report, Mr. June said that banking exposure is a "problem area" for U.S. pension plans, including LACERS.
LACERS' broad bank exposure is $688 million, mainly through its index stock funds, Mr. June said. Of that total, $51 million is in equities of regional banks, which are the banks that appear to be having more problems, he said.
Staff is currently having discussions with its equity index managers. He added, "there's not much we can do about it. But we're not ignoring it."
