Message from Chief Investment Officer Rod June

With 2024 behind us, financial markets experienced strong resilience but navigated pressing challenges. On the one hand, investors witnessed growth in GDP, declining inflation, reduction in interest rates, strength in corporate earnings, improving unemployment figures, and sound footing in the banking system.  On the other hand, economic, market, and geo-political factors still weighed heavily on investors’ minds as elevated inflation levels above the 2% Federal Reserve’s (Fed) target and interest rate uncertainty, which hovered between 4.25%–4.50% after declining from the mid-5% range earlier in the year, took center stage.

Investment performance was mixed. The Fed’s easing of monetary policy and an improving economic backdrop lead positive gains in the U.S. equity markets, driven by strong earnings in technology and healthcare sectors. In fact, the S&P 500, a broad U.S. equity market indicator, returned over 23%.  Outside the U.S., markets were muted with developed and emerging markets trailing major U.S. market indices as evidenced by one widely followed global equity market barometer, the MSCI All Country World Index (excluding U.S. holdings), which returned just north of 5% at year end.  

Other broad asset classes closed the year with varying performance, including challenges to core fixed income markets, which are sensitive to interest rate movements.  Private credit markets fared better due to strong demand for corporate borrowing.  While private real estate faced a tough market, specialty real estate opportunities, such as student and senior housing, cold storage facilities, and technology infrastructure, provided attractive options to consider. Infrastructure, which has performed well in past years, continues to be an attractive investment consideration for investors who also seek safety from persistent inflation, improved cash flow stability, and greater portfolio diversification.

Not to be ignored, geo-political events and issues outside the U.S., including several contentious wars and questionable economic, political, and technological policies and practices, continued to hamper global economic stability.  As a result of these uncertain conditions, and despite strong U.S. equity returns, LACERS total fund one year return stood at 7.36%, net of fees, that beat the assumed rate of return of 7% but dipped below several key policy benchmarks over various time periods.

As we evaluate 2025, the investment outlook remains similar to what was experienced last year: persistent inflation, elevated interest rates, and geopolitical uncertainties. While these factors may influence near-term tactical investment decisions, opportunities such as private credit, real assets, and technology continue to present attractive long-term investment options. LACERS Board of Administration embraces a disciplined, strategic total-fund investment approach that prioritizes performance, diversification, and a policy-driven risk management framework. These investment priorities help to ensure consistent and timely delivery of your retirement and health benefits.