investor allocations

LACERA adds $275m to transition portfolio with new PE commitments

LACERA has also published its ESG-related divestment guidelines for public markets assets.

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The Los Angeles County Employees’ Retirement Association committed $275 million to two transition-focused private equity fund managers in its latest investment committee meeting, New Private Markets has learned.

The board approved a $125 million investment into Ara Partners’ third flagship industrial decarbonisation fund, according to LACERA documents seen by New Private Markets. Ara’s Fund III launched in late 2022 with a $2 billion target, NPM reported exclusively in November. It will invest in decarbonisation solutions for industrial assets in sectors such as manufacturing, materials and chemicals, energy, food and agriculture.

LACERA also committed $75 million to Appian Natural Resources III, with a further $75 million earmarked for co-investments alongside Appian Fund III. Appian focuses on metals and mining companies and projects for “energy transition metals”, according to LACERA’s documents.

The pension fund, which has assets worth $72.5 billion, is an experienced investor in climate funds. It committed $100 million to two decarbonisation-focused funds in ADM Capital’s Cibus strategy in 2022; it also invested in TPG’s first Rise Climate fund, according to NPM‘s database.

Going public

Separately, LACERA has developed guidelines for ESG-related divestments in its public markets portfolio; these were published in the documents accompanying the pension fund’s investment board meeting last week (from page 115). While the guidelines apply to LACERA’s fixed income, listed equities and commodities portfolios, they demonstrate the lengthy steps and considerations LACERA has in place for exiting assets on ESG grounds.

When ESG-related issues arise in its portfolio, LACERA considers “the economic and reputational impact of the issue on LACERA”, the cost and staff hours involved in finding substitutions, engagement options and strategies and mitigating factors for the ESG issue. A divestment policy for less liquid markets, such as private equity, may be even more extensive.