At its Apr. 22 board meeting, the $23.6B LA City Employees’ Retirement System said the Trump Administration’s tariffs may impact exchange rates and, ultimately, investment returns from the plan’s public equities portfolio.

Wilkin Ly, the pension fund’s deputy chief investment officer, presented the investment update, saying its public non-U.S. and emerging markets allocations may be particularly vulnerable. As of Sept. 30, 2024, the fund’s asset mix included 21.50% U.S. equity allocations, which exceeded its target of 21.00%. By comparison, its non-U.S. equity allocations sat at 25.63% against a target of 26.00%.

However, the fact that the fund has been overweight in non-U.S. equities could “bode well” for the portfolio’s performance, Ly noted, given the softening of the U.S. dollar has made European equities more attractive and increased defense spending in the region.

As investors shift money out of the U.S. market into fixed income, the flight to safety could result in increases to the price for government bonds but lower the yields, he said, during the meeting. He added that the potential for lower yields could also affect corporate credit.

In terms of the effect of market volatility on LACERS’ private market assets, Ly noted the portfolio could see a benefit due to the low correlation from public markets and private markets. “However, as we know, deal making has slowed in 2025, but this may be viewed as an opportunity, since, usually, if there’s a dislocation of public markets, private markets may shine due to a lack of price discovery software as a service.”

While there has been a decline in mergers and acquisitions activity within the mega-cap asset community, Ly pointed out there are deals still in play on the lower-middle-market side, particularly in cases that involve succession planning or in certain liquidity events within the private real estate sector. “The impact of this asset class may be hurt by increasing construction costs, which can delay projects and add uncertainty to the market. It can also impact industries, such as manufacturing and retail and reduce demand for certain property types.”

The plan’s investment returns can create value for certain real estate property types, such as industrial, where it is currently overweight, said Ly, noting some of LACERS’ general partners can add value in terms of onshoring, reshoring or restructuring of supply chains. However, he added that stricter immigration is obviously causing an issue with hiring certain employees, which is something the plan is factoring. 

He noted that the plan is 5.6% away from its high-water benchmark achieved on Sept. 27, 2024, of $25B. 

Kevin Novak, principal at NEPC, who also spoke during the meeting, noted that the consultancy will be setting interim asset class policy targets as the plan continues working toward long-term strategic goals, which will result in rebalancing of asset allocations and benchmarks.

By summer/fall 2025, NEPC aims to begin executing restructuring of the plan’s non-U.S. equity asset class, which may include the removal and addition of strategies across non-US developed markets and emerging markets. It will also determine Infrastructure Implementation, including near-term restructuring to include the addition of public infrastructure, with longer-term consideration given to private infrastructure strategies.

Additionally, the NEPC also expects to begin the request for proposals process for investment managers to execute the asset allocation restructuring.