LACERA’s Grabel Emphasizes ‘Strategic Asset Allocation’

During a CIO webinar interview, Los Angeles County Employees Retirement Association CIO Jonathan Grabel explained how the fund designs its portfolio.

Jonathan Grabel, CIO of the Los Angeles County Employees Retirement Association, participated in the 2025 CIO interview webinar series.

LACERA manages the retirement fund for public employees in Los Angeles County. With $87 billion in assets under management, it is the largest county pension fund in the U.S. The plan covers more than 200,000 active and retired members.

Grabel discussed the plan’s asset allocation, how a plan can construct a portfolio to withstand the dynamics of uncertain interest rates, how to build a skilled investment team to manage institutional portfolios with operational effectiveness and more.

“What we’re trying to do is pay retirement benefits tomorrow and well into the future,” Grabel said. “Which means that we have to allocate the capital that is entrusted in us across a variety of investment strategies and recogniz[e] that the future is always uncertain.”

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Watch the full webinar interview here.

4 Buckets, Plus 1 More

LACERA’s asset allocation is the fund’s primary return driver and the primary means of risk management, according to Grabel.

“The best recommendation I have for any peer, for any plan, is to have a set of durable investment beliefs,” Grabel said. “I think having investment beliefs is kind of that North Star that guides you throughout periods of turbulence.”

LACERA has four main buckets within its strategic asset allocation, but there is a fifth as well. The first is growth, which includes public and private equities, as well as non-core real estate. This comprises 48% of the fund, and Grabel said it is the primary driver of long-term returns for the fund.

The second is functional asset categories, or credit. While LACERA has been an investor in credit for a long time, Grabel said, previously it was not in a consolidated strategy.

“We had credit as a part of our fixed-income portfolio, our hedge fund portfolio, our private equity portfolio, our real estate portfolio,” Grabel said.

The asset class was consolidated in 2018, when LACERA found it was paying different fees across different structures for similar exposure, Grabel said. The smart move was to group it together, and credit now makes up 13% of the fund’s asset allocation.

Real assets and inflation hedges are the third bucket. The bucket is designed to both have a low correlation to equities and to produce income. The bucket groups together core real estate, infrastructure, natural resources and Treasury inflation-protected securities. The bucket has a 15% allocation.

Risk reduction and mitigation make up the fourth bucket of the fund’s strategic asset allocation. It includes investment-grade fixed income, long-term government bonds and cash. The bucket also includes absolutely return strategies, or hedge funds. The bucket has a 24% allocation.

“Our hedge fund allocation is designed to have less than 0.1% equity beta, very low high-yield beta, so it’s really when the markets are zagging or zigging—whatever they’re doing now, I think maybe now they’re zigging and zagging—what we want our absolute return portfolio is to be a foil, to be a steady positive that dampens volatility in the portfolio as a whole,” Grabel said.

The extra bucket in LACERA’s asset allocation is overlays and hedges, but even with a 0% target allocation, the bucket is very important to managing the portfolio, Grabel noted. The fifth bucket includes LACERA’s currency hedge, in which the fund hedges 50% of the developed currencies in its global equities portfolio by holding them in dollars, rather than a more volatile foreign currency.

Since the program’s inception in 2008, the hedging strategy has netted LACERA $1.6 billion in gains, “which is fantastic for a program that dampens volatility,” Grabel said.

The bucket also includes a cash overlay, which the fund uses to rebalance the portfolio on a daily basis, in order to rebalance back to the target weights in the fund’s strategic asset allocation.

“By reducing risk and better adhering to our policy targets, that’s generated about $600 million in gains over the last five, six years,” Grabel said.

Strategic asset allocation is Grabel’s answer to every question, he said.

“It’s my answer to principally what we’re doing in the current environment, where, once again, we’re vigilant,” he said. “We acknowledge this turbulence in the market, this [volatility], but it’s possible at the same time for markets to be too volatile or not volatile enough to overreact and underact, and I think we’ve really tried to have a portfolio that works in all environments.”