LACERA follows a carefully planned and executed strategic investment program to produce, protect, and provide the promised benefits for LACERA’s members and beneficiaries by:
- Achieving the fund’s assumed rate of return over the long term
- Mitigating investment risks through fund diversification
- Ensuring adequate liquidity of the fund
Our strategic asset allocation reflects our investment beliefs and underlying assumptions about how capital markets operate, including:
- Long-term strategic asset allocation will be the primary determinant of LACERA’s risk/return outcomes.
- Although cyclical, markets are largely efficient over the long term.
- Passive management is the preferred structure for investment management, with flexibility for active strategies to add value.
- Private market assets can add value, at prudent levels.
- A global perspective is necessary to diversity risk, and a prudent amount of risk is acceptable to achieve long-term target returns.
We categorize capital outlays into four categories, defined by the function each serves in the portfolio:
- Real Assets and Inflation Hedges
- Risk Reduction and Mitigation
These categories are designed to diversify the fund and optimize upside growth, while mitigating downside risk. The asset allocation determines what proportion of the fund is allocated to each functional category and underlying asset class, including target weights and allowable ranges as a percentage of the fund.
In order to determine its strategic asset allocation, LACERA conducts a comprehensive asset allocation study every three to five years, or at the Board’s request.