Los Angeles CIO Discusses Pension’s Unique Infrastructure Strategy

The Los Angeles County Employees’ Retirement Association’s (LACERA) chief investment officer is looking to lead the pension’s first foray into infrastructure investments, and staff recommended the pension hire DWS to manage a “Real Assets completion portfolio” in a separate account during a recent board meeting.

The $56.3 billion retirement system adopted a 2%, or $1.1 billion, allocation towards the asset class last year and issued an RFI for the mandate, which will also manage new natural resources investments, in August. After receiving 11 submissions, investment staff ranked the three highest proposers: DWS, Cohen & Steers, and BlackRock, according to a report.

“The pension is prioritizing reaching the targeted asset allocation for the new asset class through the completion portfolio such that it can reach the target weights for each asset class in its portfolio and prevent being overexposed to other asset classes,” the pension’s CIO, Jonathan Grabel, told CIO.

This would entail DWS being responsible for fulfilling the exposure initially through public markets equities pertaining to companies operating in infrastructure markets. “The team intends to draw down capital from the listed securities portfolio to fund private markets commitments as they are approved by the board,” Grabel added.

Subsequently, Grabel and his team intend to reach a financial strategic allocation of approximately 1.0%, or $500 million, before the end of the year. “The new allocations will be funded by reductions in other asset classes as part of the implementation plan of the strategic asset allocation,” a report reads.

DWS’ Global Infrastructure Composite generated a cool 16.05% net return in 2017 on behalf of 25 institutional investors participating in its efforts, according to a report.

Infrastructure was the California Public Employees’ Retirement Systems’ highest-performing asset class in the 2017-2018 fiscal year, generating a 20.6% net return. The $77 billion Oregon Public Employees Retirement Fund recently vowed to invest in at least five infrastructure strategies last year, growing the portfolio from $1.3 billion to $2.4 billion.

Grabel joined LACERA in April 2017 after the prior CIO David Kushner resigned in 2015.