Los Angeles Fire & Police Pensions rehired Portfolio Advisors as its core and specialized private equity investment consultant, following a search launched in October.
The board of the $28.7 billion pension fund at its April 6 meeting hired incumbent Portfolio Advisors for its $4.9 billion private equity portfolio. LAFPP has a 14% private equity target allocation.
The specialized private equity manager program focuses on emerging manager funds smaller than about $500 million. PA has been a private equity consultant for the pension fund since 2010.
RVK, LAFPP's general investment consultant assisted.
Separately, LAFPP's board voted to eliminate its $1.2 billion international emerging markets equity allocation and directed the staff and RVK to review options for reallocating some or all of the international emerging markets assets to other asset classes such as private equity and commodities. The staff and RVK are expected to return to the board with a recommended updated asset allocation at a future meeting.
Tom Lopez, LAFPP's interim CIO, explained that the staff was recommending the elimination of its international emerging markets equity allocation due to underperformance.
"The main pillar of my case is that it just hasn't worked," Mr. Lopez said. LAFPP has been invested in international emerging markets since 1999 and "you have to go back 35 years to see emerging markets outperform developed markets," Mr. Lopez told the board.
That's a very long time to wait, he added.
Eliminating international emerging markets equities would go against "conventional wisdom" and against what other pension plans are doing, Mr. Lopez said, and eliminating the sector is a way of limiting the pension fund's risk in light of the current geopolitical risks and in light of returns. The risk of investing in international emerging markets equities is not just volatility risk but the risk of losing the money in the emerging markets equity portfolio, he added.
Instead, the staff recommended either adding the money to its international equity portfolio or investing in assets that could "generate a better return" than core international equities without the risk of losing money. The board chose the second option.