INVESTMENT OFFICE STRATEGIC PLAN

Transcription

1 INVESTMENT OFFICE STRATEGIC PLAN January 27, 2017 Vache Mahseredjian, CFA, CAIA, FRM, ASA Interim CIO LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION

2 INVESTMENT DIVISION MISSION STATEMENT The Investment Division strives to be a premier institutional investor seeking to meet LACERA's investment objectives in accordance with LACERA's Mission, Vision, and Values. We are united in our pursuit of excellence and committed to implementing LACERA's policies and procedures, consistent with LACERA's investment beliefs, and always mindful of our fiduciary duty to LACERA's members. 2

3 GOALS & PRIORITIES Recap by Individual Asset Class Multi-Asset Initiatives: Collaborating with Meketa Risk Management (TruView) Corporate Governance Other Opportunities Allocation Special Programs Proposed New Team Structure: Risk & Performance Planning for the Future 3

4 ASSET ALLOCATION Asset Class Target as of 12/31/2016 Target for 4Q-2018 U.S. Equity 23.8% 22.3% Non-U.S. Equity Developed Markets (Unhedged) 21.6% 19.2% Fixed Income 25.4% 27.8% Private Equity 10.0% 10.0% Real Estate 11.0% 11.0% Commodities 2.8% 2.8% Hedge Funds 3.4% 5.0% Cash 2.0% 2.0% 4

5 Private Equity: Implement AB2833 Compliance Request GPs utilize ILPA fee template Work with outside consultant (Pavilion) to gather data Develop reporting procedures Complete separately managed account reviews (Pathway, JP Morgan, Morgan Stanley) and RFPs Continue global search for top-quartile managers 5

6 Global Equity: Review and revise Emerging Manager Program Assess opportunities to enhance ESG/Corporate Governance integration into manager selection and monitoring Initiate U.S. and Non-U.S. Equity structure reviews Further utilize benefits of factor analysis in portfolio management 6

7 Fixed Income & Commodities: Fixed Income Structure Review Commodities Structure Review Address Meketa s Operational Recommendations regarding Securities Lending and Cash Management 7

8 Real Estate: Reduce allocation to reach 11% target (be a net seller) Position portfolio more defensively by increasing exposure to: Apartments Industrial Properties RE Debt (as a lender) Diversify by increasing exposure to international investments 8

9 Hedge Funds: Implement 2017 Investment Plan and create direct portfolio by allocating $500 million across several managers Monitor wind-down of San Gabriel 2, the Grosvenor-managed credit portfolio funded in Enhance risk aggregation to incorporate direct portfolio Hire 1 analyst 9

10 Multi-Asset Initiatives: Collaborating with Meketa The following projects are in addition to asset class reviews for public equities, fixed income, and commodities: Annual Review of IPS Review of Benchmarks Review of Fees Other Opportunities policy Triennial Asset/Liability optimization in 2018 OPEB Trust IPS and asset allocation 10

11 Multi-Asset Initiatives: TruView ( Risk 1.0 ) Ongoing refinement of output (data validation & Alts modeling) Expect initial total plan risk report by Q Multiple presentations and educational sessions, starting with February Committee meeting 11

12 Multi-Asset Initiatives: Corporate Governance Educational deep dives on selected topics Refresh and customize corporate governance principles and proxy policy to align with best practice Seek Committee guidance and Board direction on priorities 12

13 Multi-Asset Initiatives: Other Opportunities Establish policies, procedures, and guidelines including: Scope of asset class Return expectations/benchmarks/risk Management Staff structure and processes for strategy due diligence, manager selection & monitoring, portfolio structure, and reporting Board approval process Role of external advisors 13

14 Multi-Asset Initiatives: Special Programs Securities Lending Review and possible RFP Transition Management panel 14

15 STAFFING STRUCTURE New Chief Investment Officer Deputy CIO Deputy CIO Sr. Management Secretary New FI & Commodities Principal Investment Officer Public Equities Principal Investment Officer Private Equity Principal Investment Officer Real Estate Principal Investment Officer Hedge Funds Senior Investment Officer Risk & Performance Principal Investment Officer Investment Officer Senior Investment Officer Investment Officer Investment Officer Senior Investment Analyst Investment Officer Senior Investment Analyst Investment Officer Investment Officer Investment Officer Investment Officer Investment Analyst Senior Investment Analyst Senior Investment Analyst Investment Analyst Investment Analyst Senior Investment Analyst Investment Analyst Senior Secretary Senior Investment Analyst Senior Secretary Senior Secretary 15

16 PROPOSED NEW TEAM: RISK & PERFORMANCE Increased portfolio complexity and heightened regulations create a need for specialists in Risk and Performance Measurement, Compliance, and Operations New team will provide services across the various asset classes, allowing for specialization of skills and closer collaboration among investment staff Team PIO is already in budget Candidate search pending selection of permanent CIO 16

17 KEY SERVICE PROVIDERS A Stable team of recently-hired service providers General Consultant Meketa hired in 2015 / Rebid in 2020 Real Estate Consultant Townsend re-hired in 2015 / Rebid 2021 Private Equity Consultant Stepstone hired in 2016 / Rebid in 2022 Actuarial Consultant Milliman re-hired in 2011 / Search currently underway Custodian State Street hired in 2013 / Rebid in

18 PLANNING FOR THE FUTURE Beyond Separate Account for Indexed U.S. Equity Voting of proxies Securities Lending Revenue Manage Assets Internally Potential Strategies o Indexed U.S. Equity Assets o Cash o Core Bonds 18