Los Angeles County Employees Retirement Association, Pasadena, committed up to €250 million ($269 million) to CVC Capital Partners IX, a global buyout fund, according to a closed session report.
The $72.7 billion pension fund has invested with CVC Capital Partners in the past, including a $50 million co-investment in 2022.
Separately, LACERA converted a $610 million investment in BlackRock's Europe Alpha Tilts Fund, an actively managed quantitative strategy that invests primarily in developed European stocks, to a separately managed account on May 31, a staff report for the board's June 14 meeting shows. The BlackRock investment represented 2.6% of the pension fund's $23.8 billion global equity portfolio as of April 30.
The conversion allows LACERA to vote proxies consistent with LACERA's corporate governance policies. LACERA's corporate governance policies do not apply in a fund because the pension did not have beneficial ownership of its investments in the fund. A separate account also increases transparency in that it allows LACERA to evaluate and report on the portfolio's investments in real-time rather than on a fund, which reports holdings on a lagged basis, the staff report said.
In other news, LACERA plans to launch its asset-liability study in July, a process that is expected to take a year, CIO Jonathan Grabel told the board at its June 14 meeting. As part of the strategic asset allocation process, Mr. Grabel said he would like the board to revisit the pension fund's currency hedging policy. LACERA currently hedges 50% of the foreign currency of its public equity portfolio. He said that he would like to reevaluate whether to hedge the foreign currency in the entire portfolio, the public equity allocation only or remove the hedge.
In response to a board member question, Mr. Grabel said also during the asset allocation process, LACERA could look at recalibrating its portfolio given the higher interest rates to "reduce risks we've had to embrace" when interest rates were near zero.
Since the last recession, LACERA has increased its exposure to private assets but investors are now in a world of rising cost of capital, which may impact private company valuations which are valued based on its last funding event, Mr. Grable said. This causes "lumpiness," meaning investments that have large infrequent changes rather than one that adjusts continuously.
Because investment risk is the biggest risk in its portfolio, "we have to be vigilant" due to the lumpiness of a section of the portfolio, he said.