Amid review, LACERA to consider ag, timber

The $56bn pension will likely put any future commitments to farmland or timber funds in a real assets bucket after a comprehensive strategic review later this year.

The Los Angeles County Employees Retirement Association will consider investing in agriculture after an adjustment to its “other opportunities” allocation policy, according to a memo from its chief investment officer.

In a presentation to the Board of Investments on January 10, Jonathan Grabel explained that no allocations had been made to its “other opportunities” category, which has a 0 percent target weight and an allocation range of 0 to 5 percent. Grabel wrote that the “other opportunities” asset category, where ag and timber now sit, would likely be eliminated if credit and real assets were established as distinct portfolios in an asset allocation study LACERA will carry out this year.

Grabel’s memo describes the additional allocation category that may be added when the asset allocation study is completed as “real assets (apart from real estate)”. In addition to infrastructure, private natural resources, treasury inflation protected securities, REITs and master limited partnerships, timber and farmland would be considered as part of the real assets category, according to the memo.

“In the past, we’ve never really had an actual investment guideline that would address that [ag and timber] and that’s what I believe that memo was for,” a source familiar with LACERA’s discussions told Agri Investor. “Not that we made a specific decision, its more strategic, [saying] that: ‘Yes, this is something we can diversify our portfolio with.’”

According to LACERA’s 2017 Annual Report, the asset allocation study is its “key strategic initiative” of the coming year and will be carried out in conjunction with general consultant Meketa Investment Group, private equity advisor StepStone and The Townsend Group, which advises the pension on its real estate investments.

As of June, the pension had $55.8 billion in total assets and had experienced 10.2 percent growth over the previous year. Though it has yet to make any dedicated agricultural investments, current policies have 2 percent of the portfolio, or $1.1 billion, dedicated to a commodities portfolio that includes metals, energy and agriculture.