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Investments at LACERS

Investment Manager Selection Process

The LACERS Board oversees the investment of approximately $17 Billion of your retirement money. The Board allocates these funds to multiple asset classes based on the Investment Policy Statement (IPS). Over 60% of these funds are invested in publicly traded stocks and bonds. However, LACERS staff and the Board do not individually buy or sell these assets on the open market. Rather, the Board entrusts this responsibility to public-market investment manager firms. Each firm is responsible for a specific fund allocation based on the IPS framework and are key partners for LACERS to meet the IPS goals.
This is how LACERS hires and selects public-market investment managers:

STEP 1 – THE RFP

LACERS uses an open and competitive Request for Proposals (RFP) process for all public investment manager searches. The RFP includes the minimum qualifications for firms, and a detailed questionnaire about the firm, past performance, their investing strategy, risk management, and other pertinent factors.
LACERS’ general fund consultant reviews all proposals. Firms that meet the minimum requirements are scored and ranked based on their experience, skill, and strategy. While performance is a very important selection factor, it is balanced against experience, organizational stability, risk management and compliance practices.  The highest ranked firms move to the next step in the selection process.

STEP 2 – DUE DILIGENCE
LACERS staff then conduct an on-site due diligence check on the highest ranked firms. Staff will meet key employees of the firm, ask questions, verify and confirm claims made in the RFP proposal, and determine if the firm can fulfill the contractual scope of services required. Staff also evaluates if the firm will fit with LACERS’ specific goals and objectives.  Due diligence also includes reference checks to gain first-hand knowledge of other clients’ experiences and satisfaction with the firm.

STEP 3 – BOARD INTERVIEWS
The Investment Committee (made up of three of the seven Board members) interviews the best-qualified firms based on the due diligence process. They are able to hear proposal details, ask questions, listen to staff recommendations and deliberate the merits of each proposal. The Committee sends their recommendations to the LACERS Board for final consideration and approval.

STEP 4 – SELECTION & STAFF OVERSIGHT
The LACERS Board reviews the Investment Committee’s report and approves one or more of the investment managers for a contract award, subject to legal review and adjustments to the proposed investment management fee.  If contract negotiations are successful between staff and the proposed investment management firm, the investment manager receives a contract spanning several years. 
During the contract period, staff and the general investment consultant monitor the firm’s performance and stability of the organization against specific performance and organizational objectives to ensure that the firm is able to repeat its investment process to earn satisfactory risk-adjusted returns.