Los Angeles Fire and Police Pensions (LAFPP) is planning to approve changes to its real assets portfolio by introducing infrastructure and expanding its real estate holdings.
The $31bn (€28.3bn) pension fund disclosed in a meeting document that once approved, it will replace its 2% commodities allocation with a new 2% infrastructure investment.
LAFPP’s investment consultant RVK believes the pension fund’s current commodities holdings do not effectively hedge against inflation as originally planned.
The proposed diversification into infrastructure is expected to deliver higher returns during periods of stable or declining inflation while reducing exposure to equity market fluctuations.
The approved plan will also enable LAFPP to increase its private real estate exposure from 7% to 8.5% by cutting real estate investment trusts from 3% to 1.5% as it targets higher returns and lower risk.
LAFPP’s investment consultant RVK believes the pension fund’s current commodities holdings do not effectively hedge against inflation as originally planned.
The proposed increase will increase management fees from the 45 basis points it incurs for public real estate to 85 basis points for private real estate. However, RVK anticipates that the potential for higher returns will justify this additional expense.
LAFPP has made a $40m commitment to the NewCold III fund, which will focus on cold storage warehouses. The Westport Capital Partners-managed fund aims to raise $2bn.
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