Key Takeaways
- • LACERS renewed a three-year emerging markets debt mandate with PGIM, with the $601.6 million portfolio outperforming its benchmark across all reported periods through June 30, 2026, securing the continuation of a relationship that began in March 2021.
- • The PGIM-managed allocation delivered 90 basis points of outperformance since inception (3.5% annualized return net of fees versus 2.6% benchmark), with stronger recent performance of 120 basis points outperformance over the trailing 12-month period (11% portfolio return versus 8.8% benchmark).
- • PGIM manages 2.1% of LACERS' $29 billion in total assets through this Credit Opportunities allocation, which spans hard-currency and local-currency emerging markets debt across sovereign, quasi-sovereign, and corporate issuers with value-add derived from country allocation, security selection, and foreign exchange positioning.
- • LACERS' consultant NEPC recommended renewal based on favorable near- and long-term performance metrics and PGIM's demonstrated ability to generate returns in both rising and falling market conditions, with the account remaining in good standing under the pension fund's Manager Monitoring Policy.
Summary
The Los Angeles City Employees' Retirement System (LACERS), managing $29 billion in assets, has renewed its three-year active emerging markets debt mandate with PGIM Inc. following consistent benchmark outperformance across all reported measurement periods through June 30, 2026. The decision, approved at LACERS' August Investment Committee meeting, extends a relationship that originated in March 2021 and represents a strategic vote of confidence in PGIM's emerging markets debt capabilities.
The $601.6 million separately managed account has delivered material outperformance on both absolute and relative bases since inception. Over the full portfolio lifecycle, PGIM generated 3.5% annualized net returns, outperforming the 2.6% blended benchmark by 90 basis points. This consistent alpha generation has accelerated in recent periods, with the portfolio returning 9.6% annualized over three years versus 8.8% for the benchmark and 11% over the 12-month period ended June 30, 2026—a 120 basis point outperformance. Even over five years, the allocation delivered 3.4% annualized returns against a 2.4% benchmark.
PGIM's strategy within the mandate focuses on three primary value-add mechanisms: country allocation decisions, individual security selection, and foreign exchange positioning. The portfolio maintains flexibility to invest across sovereign, quasi-sovereign, and corporate issuers within emerging markets, encompassing both hard-currency and local-currency debt instruments. This diversified approach has enabled the strategy to perform effectively across varying market conditions, a capability that NEPC highlighted as particularly relevant to LACERS' long-term objectives.
NEPC, serving as LACERS' investment consultant, provided the formal recommendation for renewal, emphasizing favorable performance trends and PGIM's track record of value creation in both rising and falling rate environments. The account status remains compliant with all requirements under LACERS' Manager Monitoring Policy, indicating no operational or governance concerns. With PGIM representing 2.1% of LACERS' total asset base within the Credit Opportunities allocation, the renewal represents a meaningful commitment to emerging markets debt as a component of the pension fund's diversified portfolio strategy.
The $601.6 million separately managed account has delivered material outperformance on both absolute and relative bases since inception. Over the full portfolio lifecycle, PGIM generated 3.5% annualized net returns, outperforming the 2.6% blended benchmark by 90 basis points. This consistent alpha generation has accelerated in recent periods, with the portfolio returning 9.6% annualized over three years versus 8.8% for the benchmark and 11% over the 12-month period ended June 30, 2026—a 120 basis point outperformance. Even over five years, the allocation delivered 3.4% annualized returns against a 2.4% benchmark.
PGIM's strategy within the mandate focuses on three primary value-add mechanisms: country allocation decisions, individual security selection, and foreign exchange positioning. The portfolio maintains flexibility to invest across sovereign, quasi-sovereign, and corporate issuers within emerging markets, encompassing both hard-currency and local-currency debt instruments. This diversified approach has enabled the strategy to perform effectively across varying market conditions, a capability that NEPC highlighted as particularly relevant to LACERS' long-term objectives.
NEPC, serving as LACERS' investment consultant, provided the formal recommendation for renewal, emphasizing favorable performance trends and PGIM's track record of value creation in both rising and falling rate environments. The account status remains compliant with all requirements under LACERS' Manager Monitoring Policy, indicating no operational or governance concerns. With PGIM representing 2.1% of LACERS' total asset base within the Credit Opportunities allocation, the renewal represents a meaningful commitment to emerging markets debt as a component of the pension fund's diversified portfolio strategy.
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