By Jon Peterson
The Los Angeles County Employees Retirement Association is planning to issue some big commitments to core open-ended commingled real estate funds over the next several years. The level of these commitments would be in the range of $2.4 billion to $6.4 billion.
The pension fund has recommended to invest in six to eight US-focused open-ended core funds that are part of the ODCE Index, as stated by the pension fund in a board meeting document. The underwriting of these funds is now in process, and the amount of each commitment could be anywhere from $400 million to $800 million per fund.
There is no pacing plan that has been established for these commitments to come in 2022. The amounts planned for the next three years after that are $1.2 billion each for 2023 and 2024 and $1.3 billion for 2025, according to a board meeting document. The objective for the pension fund’s core portfolio is to help produce income and have a hedge against inflation while also diversifying the fund. The pension fund will use the core commingled funds as a way to achieve a positive tilt in industrial, multifamily and niche sectors including life science/R&D and self-storage.
LACERA is also planning to play a very active role in committing capital to non-core real estate over the next three years for a total of $3.2 billion, as written by the pension fund in a board meeting document. The projected amounts are $800 million next year and $1.2 billion each in 2023 and 2024.
This capital is available as the pension fund has issued a one percent targeted allocation increase to its value-add/opportunistic strategy starting in 2022. The investment plan calls for the investor to invest in four to eight funds on an annual basis with each commitment somewhere in the range of $125 million to $250 million.
This part of the real estate portfolio will be invested in commingled funds on a global basis. It will allow the investor an opportunity to place capital in more dedicated niche sector funds.
LACERA is planning to take a different tact for its emerging manager program for real estate. The pension fund currently has one emerging manager within its real estate program. This is the Los Angeles-based Cityview.
LACERS is now planning to launch in 2022 a Request for Proposal to retain an emerging manager program advisor, as stated in a board meeting document. The firm selected would source and construct a custom portfolio of emerging manager funds for its investment purposes. This capital would largely be focused on non-core opportunities.