LACERS Increases Private Equity Maximums


Michael Wilkinson, LACERS/Legal Representative

By Michael R. Wilkinson, LACERS Commissioner

Private equity is one of LACERS’ most important investment classes and one we depend on to produce the returns needed to keep our plan strong. The Board of Administration has approved moving the maximum amount that our investment staff can approve without Board approval to a maximum of $150 million.

As you know from my previous articles, LACERS has increased the allocation to private equity to 16 percent of the total fund. As of Jan. 31, 2022, the fund was valued at $23.2 billion, so the amount targeted to private equity was $3.7 billion.

The target allocation, the amount that LACERS plans to commit to this asset class, has increased from 12 percent in 2017 to 14 percent in 2019, and then finally increased recently to 16 percent. The allocation target to private equity has increased, but the maximum deal size discretion delegated to staff has not kept pace.

The top performing funds are in hot demand, and LACERS must compete with other institutional investors for access to these highly sought-after funds. Many are oversubscribed, meaning more investors want to invest in them than there is room available in these funds.

In addition, many of these opportunities move quickly, and highly coveted opportunities become unavailable if additional time is required for prior Board approval.

So the LACERS Board delegates discretion to LACERS’ investment staff, working in concert with the Board’s external investment consultants, to evaluate, review and then make those investments that add value, always consistent with Board-adopted investment policies.

The new investment limit allows the $150 million maximum without prior Board approval. That is an increase from $50 million for first-time investments and $100 million for follow-on funds. These larger investments maximums are needed both to keep up with the higher allocation targeted to private equity and to effectively compete with other institutional investors for highly-sought-after investment opportunities.