The $10.8 billion Los Angeles City Employees’ Retirement System (LACERS) adopted strategy recommendations for its newly-created credit opportunities and real asset allocations at its Feb. 14 meeting, according to a fund official. The board adopted two new asset classes at its Jan. 19 meeting (MMI, 1/13), creating a 5% allocation for credit opportunities and increasing the real assets allocation to 10% of the total portfolio from 7%. The board adopted an emerging investment manager policy and extended an emerging markets mandate.
The target allocation for the credit opportunities portfolio will be 55% U.S. and non-U.S. high-yield bonds (45-65% range), 35% emerging-markets debt (30-40% range), 10% leveraged loans (0-15% range) and 0% distressed debt/opportunistic bonds (0-5% range). The portfolio will be expected to return 50 basis points, net of fees, over a custom benchmark of 65% Barclays Capital U.S. High Yield Capped Index/35% J.P. Morgan Emerging Markets Bond Index–Global Diversified over a market cycle.
LACERS had an existing 7% allocation to private real assets, which will be reduced to 5%, while a 5% public real assets allocation will be added. The target allocation for the class will be 50% private real estate (40-60% range), 30% inflation-linked bonds (25-35% range), 10% commodities/natural resources (5-15% range), 5% real estate investment trusts (0-10% range), 5% multi-asset real asset/return strategies (0-10% range), 0% timber/farmland (0-3% range), 0% master limited partnerships (0-2% range), 0% infrastructure (0-2% range) and 0% oil and gas partnerships (0-2% range). The class will be expected to return 5% over the U.S. Consumer Price ....