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P&I 1,000: The Largest Retirement Plans

2008 P&I 1,000
Issue Date: January 21, 2008
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Illinois State Board of Investment
Assets are in millions of dollars.
Total assets$15,593
Defined benefit$12,520
Defined contribution$3,073
DEFINED BENEFIT PLAN:
Employer DB contributionsn/a
Benefit paymentsn/a
Asset mix:
Domestic stock47%
International stock11%
Domestic fixed income17%
Cash equivalents1%
Private equity4%
Real estate equity10%
Mortgages3%
Other7%
DEFINED CONTRIBUTION PLAN:
Assets in:
457$3,073
Total DC contributions$166
Asset mix:
Domestic stock66.3%
International stock4.1%
Fixed income6.2%
Stable value19.1%
Lifecycle funds4.3%
CHICAGO - As of Sept. 30, Illinois State Board of Investment's total employee benefit assets increased 9% from a year earlier. Defined benefit assets increased 9% during the same period; defined contribution assets increased 11%.
During the past year, Judge Matthew F. Kennelly of U.S. District Court, Chicago, overturned an Illinois statute requiring public pension funds in the state to divest investments of companies with ties to Sudan. But Illinois enacted a new Sudan divestment law to overcome the judge's objections and also enacted a separate Iran divestment law.
The board dropped BlackRock, which ran a $454 million core bond portfolio. It used the proceeds to finance expansion of alternative fixed income, including selecting McDonnell Investment Management and TCW Group to manage $120 million each in portfolios of senior secured bank loans of non-investment grade borrowers, pending contract agreements. The remaining $214 million was added to the existing assignment of the board's core bond manager, Western Asset Management, bringing its portfolio to $689 million. The move completed the fund's 26% reduction of core fixed income to 5.5% of total assets, while increasing alternative fixed income to 9% of total assets from 7%.
The board hired State Street Global Advisors to run $333 million in an MSCI World ex-U.S. index fund, replacing Boston Co. Asset Management, which was terminated from a $333 million active international developed and emerging markets equity portfolio after seven international equity professionals left to join Munder Capital Management.
It terminated Walter Scott Partners, which managed $276 million in active large-cap international equity portfolio benchmarked against the MSCI World ex-U.S. index. The board hired SSgA to manage the Walter Scott proceeds in an MSCI EAFE index fund.
It hired Loomis Sayles to manage $297 million in high-yield bonds, replacing Harris Investment Management, which was dropped.
It terminated New Amsterdam Partners, which ran $345 million in active domestic midcap growth equity for the fund; EARNEST Partners, $190 million in active domestic small-cap equity; and High Pointe Capital Management, $92 million in active domestic large-cap value equity.
New Amsterdam's portfolio was split evenly between existing domestic active midcap growth managers Goldman Sachs Asset Management and William Blair, raising their assignments to $538 million and $531 million, respectively.
EARNEST's proceeds were reallocated to existing managers RhumbLine Advisers; Segall Bryant & Hamill Investment Counsel, Opus Investment Management and IronBridge Capital Management. RhumbLine got $60 million, increasing its Russell 2000 Value index fund to $232 million; Opus, $40 million, raising its active domestic small-cap value equity assignment to $100 million; and Segal Bryant & Hamill and Iron Bridge, $55 million and $35 million respectively, increasing their active domestic small-cap core equity portfolios to $175 million and $173 million.
High Pointe's proceeds went to Atlanta Life Investment Advisors, adding $25 million to its existing active domestic large-cap value equity portfolio, for a total of $69 million, and the remaining money will go for benefit payments.
It hired EnTrust Capital to run $120 million in a hedge fund of funds. The move completed the fund's 5% target hedge fund allocation, a process that began in 2005. Funding came from rebalancing equity portfolios and from reductions to S&P 500 index funds managed by Amalgamated Bank and RhumbLine Advisers, which each had about $800 million.
It committed $35 million each to private equity funds run by Sterling Partners, Blackstone, KPS Capital Partners, and Jordan Co.'s Resolute Fund II. Sterling focuses on middle-market buyouts; Blackstone on large-market buyouts; KPS on corporate turnarounds; and Resolute on mostly U.S. with some Asian and other regions. Funding will come from cash flow and rebalancing over an expected three-year investment period
In real estate, it committed $30 million each to Blackstone Real Estate Partners VI, which will have 10% to 20% international exposure and the rest in U.S. properties; Colony Investors VIII real estate fund, which will focus 50% in Asia and the rest in Europe and North America; and Tishman Speyer Real Estate Venture VII, which will invest domestically.
The State of Illinois Employees' Deferred Compensation Plan, of which the board is fiduciary, rehired T. Rowe Price as record keeper.
Emily Reed was promoted to general counsel and chief compliance officer at the fund, a new position. She had been compliance officer. Alejandra Garcia was named portfolio manager for emerging and minority managers. She had been executive assistant to executive director. Tim Kominiarek was named portfolio manager for private equity and real estate. He replaced Joy S. Winterfield, who joined Allstate Real Estate Group as a portfolio manager. Mr. Kominiarek was assistant director of research at Marco Consulting Group.
DEFINED BENEFIT MANAGERS:
Domestic equities: Amalgamated Bank, Ativo Capital Management, Atlanta Life, Brandywine Asset Management, Buford Dixon Harper & Sparrow, Channing Capital Management, Decatur Capital Management, Goldman Sachs Asset Management, Howland & Associates, IronBridge Capital Management, LSV Asset Management, Lynmar Capital, Martingale Asset Management, NWQ Investment Management, Opus Capital Management, Profit Investment Management, RhumbLine Advisers, Segall Bryant & Hamill, SSgA, Trust Fund Advisors, William Blair.
International equities: Franklin Templeton, GlobeFlex, State Street Global Advisors.
Fixed income: AFL-CIO, Amalgamated Bank of New York, Chicago Equity Partners, Fort Washington Investment Advisors, LM Capital Group, Loomis Sayles, SSgA, Union Labor Life Insurance, Western Asset Management.
Hedge fund of funds: EnTrust Partners, Grosvenor Capital Management, IVY Asset Management, Mesirow Financial, Rock Creek Group.
Real estate: Apollo, Aslan, Canyon Johnson, CB Richard Ellis, Commonwealth, DLJ, ING Clarion, JPMorgan; Koll Bren, LF Strategic, MGA, MacFarlane, Olympus, Premier, Prudential, Realty Associates, RLJ, RREEF, Walton Street.
Private equity: ABS, BCI, Bear Stearns, Blackstone, Behrman, Boston Millennia, Castile, Cornerstone, Court Square, DLJ, Frontenac, Golder Thoma Cressey Rauner Hopewell, Inroads, InterWest, INVESCO, JK&B, Kohlberg Kravis Roberts, Lightspeed, Madison Dearborn, MDCP, Mesirow, OCM, Penman, Reliant Equity, Resolute, SCP, Sprout, Sterling, Summit, TL, TCW, Thomas H. Lee, Warburg Pincus, Weiss Peck & Greer, Welsh Carson Anderson Stowe, Wind Point.
Infrastructure: Alinda, Macquarie.
DEFINED CONTRIBUTION MANAGERS:
Domestic equities: Columbia, Fidelity, Vanguard, Legg Mason, Ariel, LSV, Wells Fargo, Northern Trust.
International equities: T. Rowe Price.
Fixed income: T. Rowe Price, Vanguard.
Stable value: Vanguard.
Lifecycle/lifestyle/balanced: T. Rowe Price.
The investment consultants are Marquette Associates, Townsend Group and Franklin Park for the defined benefit plan and Iron Capital Advisors for the defined contribution plan.
Key personnel overseeing the investment management of the defined benefit plan are William R. Atwood, executive director, and Scott Richards, senior portfolio manager. Overseeing the defined contribution plan are Katherine A. Spinato, deputy executive director, and Mr. Atwood.

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To purchase a hard copy or electronic reprints, please contact Laura Picariello at (732) 723-0569 or email lpicariello@crain.com.

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