US - Cody Ferguson, one of the trustees of the $30bn Los Angeles County Employees Association (LACERA), has revealed that only one in 27 of the fund's private equity investments has produced positive returns.
Ferguson defended the pension fund's private equity record by claiming that despite the poor performance of some investments the risk was worth it as the potential rewards on alternative investments are 10 to 15 times on anything standard. He added: When one of them produces, it wipes out your losses and then some.
To highlight the value of private equity investments, Ferguson revealed that on two occasions LACERA's private equity investments prevented the fund from going into the red.
Ferguson, one of nine trustees of LACERA's investment board, added: “That's two fiscal years that's happened now. You're talking to an advocate of alternative investments.
During those two years, Ferguson said that not only would the pension fund have gone into the red, but contribution levels might have had to have been recalculated to cope with the deficit.
Despite his enthusiasm for the asset class, Ferguson did say that private equity firms should increase the level of awareness amongst investors about the risks involved in investing in private equity. I think that they need to make it far more plain for the average human being to understand that they are going to lose money, enormous amounts of money, in a fiscal year, he said.
By Geoffrey Ho
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