Pension funds diversify investing with a view to spurring economy.Can a local $13 billion pension fund help jump-start the regional economy, and finance Southland growth companies? The short answer is yes, but only if money managers can make the investing look prudent. The Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County Employees Retirement Association, or LACERA LACERA Los Angeles County Employees Retirement Association , manages the $13 billion county employee pension fund, the golden years Noun 1. golden years - the time of life after retirement from active work time of life - a period of time during which a person is normally in a particular life state nest egg Nest Egg A special sum of money saved or invested for one specific future purpose. Notes: Examples of the purposes for which nest eggs are usually intended include retirement, education, and even entertainment (vacations and cruises). for 76,000 workers and 36,000 retirees and survivors. And it has begun investing in venture capital funds Venture Capital Funds An investment fund that manages money from investors seeking private equity stakes in small and medium-size enterprises with strong growth potential. Notes: , to help spur growth among smaller businesses and bolster the economy -- while earning a high return for its beneficiaries. In days of yore of old time; long ago; as, in times or days of yore. - Pope. See also: Yore , pension funds invested only in domestic bonds. In the early 1980s, many began investing also in stocks, and by the mid- to late-1980s real estate was added to the mix. Some funds, such as LACERA, also began to invest internationally -- indeed, the stated goal of LACERA is to invest 20 percent of its assets overseas. But the 1990s has changed the tune of many pension fund managers. Real estate has become a Waterloo for many pension funds, and international investing today has an unpatriotic ring to it. Besides, the Japanese stock market has fallen 45 percent in the last two years. The latest and greatest pension fund idea? Investing in America and local economies, particularly if the investing fulfills a social purpose, such as spurring growth companies or housing. Example: The California state employee pension fund has committed $225 million to housing and may commit more, while several East Coast pension funds are eyeing a $300 million plan to build housing here. Socially or economically active investing Active Investing An investment strategy involving ongoing buying and selling actions of the investor. Active investors will purchase investments and continuously monitor their activity in order to exploit profitable conditions. Notes: Active investing is highly involved. is an elephant of a idea: There is about $3 trillion in the nation's various public and private pension funds. For more on this development, the Los Angeles Business Journal interviewed Charles Conrad Charles Contrad is the name of:
Q. Is it possible for the county pension fund to promote local economic growth? A. The question is, can you take investments in small- and medium-sized companies and convert them into institutional investment products? Pension funds are the last, great reservoir of capital in this country, and we need to invest in growth businesses. But pension fund trustees are just that, trustees, and we are held to very high standards by our beneficiaries. The challenge will be to create a bridge between the pension funds and the growth companies. Q. How can we build the bridges? A. We rely upon consultants and investment counselors to give us a Good Housekeeping Good Housekeeping is a women's magazine owned by the Hearst Corporation, featuring articles about women's interests, product testing by The Good Housekeeping Institute, recipes, diet, health as well as literary articles. seal of approval on investments. Right now there are not enough of these consultants out there. We need managers to assess the risk, to evaluate participants, to make sure the investment process is disciplined enough and structured enough to meet our needs. Q. But you are already invested in some venture capital funds. A. We have a consultant who serves as a gatekeeper into those funds. Q. So couldn't you just go into a venture capital fund, but one that seeks out companies in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, ? A. That's one mechanism. In fact, we do have investments in venture companies that do business here, but we didn't target them, it just happened through the existing venture funds. Q. Is there a problem that no matter how many layers of consultants and reports and bureaucracy you put, that politics would play a role in which businesses get capital? It gets down to somebody gets money from the pension fund and somebody doesn't, and aren't those not selected going to say it was because they are black, or because they are white and the fund was forced to select a black? A. That's one reason why pension funds have stayed at the top of the capital structure and poured money into it, allowing the capital structure (money managers and venture fund operators) to allocate those funds. We need a capital structure that would allocate those funds to those who are creating jobs and wealth. Q. How much money are we talking about, how much could you allocate? A. We have $13 billion in the county fund, but you also have the state employee fund, the state teachers fund, and the University of California The University of California has a combined student body of more than 191,000 students, over 1,340,000 living alumni, and a combined systemwide and campus endowment of just over $7.3 billion (8th largest in the United States). fund, about $150 billion in all. If 5 percent to 10 percent were allocated to venture capital funds, that would be between $7.5 billion and $15 billion. Q. Given the political climate, and the Metro Line-Sumitomo event (in which a contract to build rail cars was given to a Japanese firm and then rescinded amid controversy), couldn't the county pension fund board of trustees board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. say, "Forget all this international stuff, why are we investing in Japan, it's a crummy crum·my also crumb·y adj. crum·mi·er also crumb·i·er, crum·mi·est also crumb·i·est Slang 1. Miserable or wretched: a crummy situation in the family. 2. market there, down 45 percent; forget office buildings, that was a disaster and everybody knows it, and let's put 20 percent of our assets into local venture capital funds?" A. There is a basic, assumed value of diversification. The board of trustees has been told by consultants that diversification maximizes returns while minimizing risk. The board needs to be held harmless, they don't carry any insurance -- besides, we are a widows and orphans In typesetting, widow refers to the final line of a paragraph that falls at the top the following page of text, separated from the remainder of the paragraph on the previous page. The term can also be used to refer simply to an uncomfortably short (e.g. fund, it's not our money. We have several hundred thousand beneficiaries that don't want us to be the Lincoln Savings of tomorrow. Q. But you went into real estate several years ago, and that bombed, and no one is suing you now, are they? A. No. But we are still trying to keep up returns to the fund. Besides, while it is true there were problems in real estate, we have not lost money in the segment. And we invested with the best and the brightest, but a lot of those projections went right into the tank. Q. Are you going to buy real estate now that the market is down? A. We are considering it. Q. How much flows into the county pension fund every year? A. In fiscal 1991, we had $477.9 million in county and employee contributions, and $718.4 million in investment income. Q. Are there any other ways for the county pension fund to finance venture capital funds that invest in Southern California? A. Well, you have Gov. Wilson at the state level, asking "Why shouldn't pension money be used to build housing?" Well, the state could issue guaranteed venture capital bonds. The pension funds could buy these bonds. Then the state could create a mechanism, using the private sector, to invest the money in growth companies. But we can't take the risk of going out there and picking out businesses and handing them money. Q. Then who is going to do it? Guys in pin-striped suits in towers in Century City and on Figueroa (in downtown Los Angeles Downtown Los Angeles is the central business district of Los Angeles, California, located close to the geographic center of the metropolitan area. The sprawling, multi-centered megacity is such that its downtown core is often considered just another district like Hollywood or )? A. I don't know Don't know (DK, DKed) "Don't know the trade." A Street expression used whenever one party lacks knowledge of a trade or receives conflicting instructions from the other party. , I wish I had a good answer for you. |
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