LACERS BOARD UPDATE
By Michael R. Wilkinson, LACERS Commissioner
Email: MikeWilkinson4LACERS@gmail.com
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ow is the time to look again at our Private Equity program since it is a vital part of our investment portfolio at LACERS. As you know, LACERS invests in widely diversified products so that the plan reduces the risk of loss by not putting all our capital in one investment or asset class.
LACERS investment staff and the Board of Administration are always working toward hitting our long-term goal of an assumed rate of investment return of seven percent for the total fund.
Private Equity is an asset class that can produce high returns, but it is also volatile, and returns can vary greatly from year to year. Aksia, LACERS’ Private Equity consultant, reported on the most recent performance of the program for the period ending Dec. 31, 2023. LACERS’ investment allocation target for Private Equity is 16 percent of the total plan assets, but our actual invested amount was 18.8 percent because distributions from the investments have been slower than expected, causing the exposure to increase.
The Private Equity program returned (internal rate of return, IRR) the following:
- 8 percent for 1 year
- 14.5 percent for 3 years
- 16.3 percent for 5 years
- 13.2 percent for 10 years
- 13.1 percent for 20 years
The one-, three-, five- and 20-year returns beat the benchmark, while the 10-year returns trailed the benchmark slightly.
LACERS Private Equity program has been cash flow positive for most of the past ten years as a mature plan. This means that the distributions have been more than the contributions during this period. Some of the advantages of being cash flow positive are having extra funds to make the pension roll, making new investments and paying other pension expenses. By comparison, new Private Equity plans tend to be cash flow negative since they are making contributions to long-term investments that will pay off later.
