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Los Angeles County Employees launches fee review

LACERA is seeking to verify that costs associated with its private equity investments are aligned with its limited partnership agreements.

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The Los Angeles County Employees Retirement Association (LACERA) is seeking a consultant to recalculate its private equity management fees, carried interest and related expenses, and conduct ongoing monitoring of capital call and distribution notices.

The consultant will analyse whether fees are in accordance with the terms outlined in its limited partnership agreements, according to the fund’s website.

The retirement system paid $4.5 million to its private equity managers in fees through the year ending 30 June, 2014, according to LACERA data.

A spokesperson did not respond to requests for comment on whether this was a routine appointment.

In January 2015, LACERA announced its plans to commit $2 billion to private equity funds this year, an increase from the $900 million it committed last year.

In July, the system’s board approved a $100 million commitment to Excellere Fund III. The investment brings the total value of the firm’s private equity portfolio for 2015 to $872 million.

Historically, LACERA’s commitments have been heavily weighted towards traditional private equity sponsors, with 64 percent allocated to buyouts and 88 percent to US fund managers.

LACERA has allocated 8.7 percent of its portfolio to private equity, with an 11 percent target allocation, according to PEI Research & Analytics.

Between July 2010 and January 2014, LACERA committed $2.29 billion towards a variety of private equity investments.

Private equity produced a 23.5 percent return for the system in 2014 and exceeded its target of 13.3 percent, according its latest annual report.

The retirement system had previously selected Grosvenor Capital Markets to assist with its private equity investment strategy.

The fund manages $48 billion in assets on behalf of 156,000 members.

The move by LACERA follows a report from the Los Angeles Fire & Police Pension System’s internal audit section published in August that recommended that its management explore various options to confirm management fees and carried interest, as reported by sister publication Private Equity International.