Quick notes on LPs #3 LACERs
Background
LACERS (Los Angeles City Employees’ Retirement System) is a limited partner to 48 VC funds. These are notes for potential GPs interested in pitching LACERS.
Selection Criteria
For all funds
300 bps over the Russell 3000 Index after all expenses is the minimum threshold.
Go through the Private Equity Consultant if you are interested in fundraising from LACERS.
EMERGING INVESTMENT MANAGER CRITERIA
- GP’s first or second fund.
- Firm has less than $1B in AUM.
- minimum fund size of $100M.
- Firm should be at least one year old.
- Minimum ownership of employees and GPs is 49%.
- No LP can represent more than 30% of the fund.
- Individual/firm must have a track record of at least five years.
- LACERS will not invest more than 10% or $30M of fund size (whichever lower).
Non-emerging funds
Invests: <$50M for new managers, <$100M for follow-on funds.
Target fund commitment: <20% of total fund size (greater requires board approval).
Other info:
Co-investments: <$50M per co-investment.
Aiming to maintain diversity across: early stage venture, late stage venture, multi stage venture and growth equity.
Performance Breakdown of VC allocation
All data is current as of March 2020. At that time LACERS had a total commitment of over $5B to the private equity asset class. Performance across Late Stage and Multi-Stage is below Cambridge Associates Benchmarks, while Early Stage is outperforming benchmarks. Please note, vintage years for which there was no benchmark available from Cambridge Associates were removed from the total section.
Early Stage VC
$155M in total commitments to Early Stage VC. Here is where LACERS seems to be most invested in emerging managers with investments to both Defy Partners and Spark Capital. Even better, we see that LACERS has gone on to fund follow-on funds, which shows willingness to commit for performance.
Late Stage VC
$135M in total commitments to Late Stage VC. Across the board these funds have shown poor performance against Cambridge Associates Benchmarks. Performance is likely a factor of focus on late stage.
Multi-Stage VC
$355M in total commitments to Multi-Stage VC. It is interesting to see NEA’s performance across three different funds. According to the late David Sweren, GPs seek out funding from reliable sources who will consistently capital to their funds. This likely explains the reason for LACERS continued commitment to NEA.
Conclusion
Existing managers should approach LACERS’ for details on their Private Equity Consultant’s info (lacers.invest@lacers.org). At time of writing, TorreyCove Capital Partners is the Private Equity Consultant for LACERS, but have been acquired by Aksia.
Emerging Managers interested in securing funding from LACERS should look to building a track record of investments that they can showcase when approaching LACERS for funding.
