LACERS considers Apollo VIII

The Los Angeles City Employees’ Retirement System is contemplating a $40 million commitment to Apollo Global Management’s eighth fund, according to documents available through the retirement system’s website.

Apollo has already cleared its $12 billion target for Investment Fund VIII and is reportedly in talks with limited partners to raise as much as $15 billion, according to reports. Apollo declined to comment on Fund VIII's fundraising target. 

The firm’s previous fund – Apollo Investment Fund VII – had generated 24.55 percent net internal rate of return, according to a LACERS report. LACERS has committed $40 million across three Apollo investment funds since 1998.

Fund VIII will likely invest between $200 million and $1.5 billion per deal. Apollo will likely dedicate approximately 75 percent of the fund to North American investments, 20 percent to Western European deals and 5 percent to Asian investments, according to a report prepared by LACERS investment officer Jimmy Wang.

“This strategy allows Apollo to opportunistically deploy capital up and down a company’s balance sheet to structure attractive deals in both expansionary markets and depressed markets,” according to Wang’s report. “Post acquisition value-add enhancements include operational efficiency improvements as well as capital structure optimization.”

Apollo has offered LACERS a management fee structure that will charge 1.5 percent of aggregate commitments up to, and including, $7 billion and 1 percent of aggregate commitments above $7 billion. The post-investment period management fee will total 0.75 percent of invested capital.  

LACERS investment portfolio was valued at $11.9 billion as of 30 June. The retirement system has a 12 percent allocation to alternatives and a 5 percent allocation to private opportunities.