The Los Angeles City Employees’ Retirement System (LACERS) is narrowing down its list of potential new credit managers to fulfil its private credit asset allocation.
The southern California pension fund announced at its 12 March board meeting that it has narrowed down its list of potential credit managers to six, according to meeting documents.
Of the six, three are operating a North American-focused strategy: THL Credit, Benefit Street Partners and Monroe Credit. The other three are operating a European or global strategy: Alcentra, Bain Capital Credit and Crescent Capital Group.
The new manager is meant to help LACERS get closer to its updated asset allocation, which was approved last April, and get its private credit allocation to 3.75 percent.
The target deal size for Benefit Street is 1-2 percent of the fund’s assets, whereas that figure is $10 million-$75 million for Monroe and THL. For Alcentra and Crescent, average deal size would be €30 million-€200 million and €15 million-€75 million, respectively. Bain would aim to deploy 1-5 percent of the vehicle into each deal.
The search hopes to find at least one new credit manager and result in a fund commitment of up to $20 million in a fund no smaller than $100 million, according to the original proposal.
LACERS is looking for funds focused on senior-secured first-lien loan strategies from managers that have a track record of at least five years, according to the document. Emerging managers were evaluated under slightly different guidelines.
The retirement plan’s manager search officially began on 10 December after a proposal to the LACERS Board of Administration on 9 October by chief operating officer Bryan Fujita and investment officer Jimmy Wang.
The pension fund received 49 proposals from 43 different firms, with 31 meeting the fund’s manager requirements, according to documents from this month’s board meeting. The fund evaluated managers based on a list of criteria consisting of 40 percent investment process, 30 percent organisation/people, 30 percent risk management, 20 percent quantitative assessment and 10 percent expected fees.
Based on the investment criteria, Monroe had the highest evaluation score in the US strategy category and Alcentra had the highest for the non-US strategy. All six of the firms remaining in the bracket are offering direct lending products.
The pension fund was unable to be reached for comment by press time.
LACERS was founded in 1937 and covers civilian employees in Los Angeles. The pension fund covers more than 26,000 active employees and more than 19,000 retirees. It has more than $17 billion in assets under management.