Illinois Teachers calls on AQR for emerging markets equity

Illinois Teachers' Retirement System, Springfield, hired AQR Capital Management to manage $496 million in active emerging markets equity, replacing GMO, which was terminated for underperformance of a similar strategy.

GMO spokesman Tyler Bradford declined to comment.

AQR already manages a total of $1.1 billion in risk parity, reinsurance and fixed-income strategies for the $39.6 billion pension fund. Trustees approved the emerging markets manager switch during a board meeting on Thursday.

From the hedge fund portfolio, Illinois Teachers' trustees approved a $150 million commitment to Magnetar Constellation Fund IV, a hedge fund managed by Magnetar Capital.

The structured credit fund focuses on buying bank loans and providing capital to cash-strapped corporations. The drawdown fund has a hybrid hedge fund/private equity structure with a two-year investment period and an eight-year lockup, Kenneth Musick, absolute-return investment officer, told the board meeting.

Also approved at the meeting was the pension fund's first foray into long/short equity hedge fund strategies with a $50 million investment in Black Diamond Thematic fund, managed by Carlson Capital Management. Mr. Musick said the fund's allocation to long/short equity funds is 10% of the $2 billion hedge fund portfolio.

Illinois TRS previously invested $140 million in Carlson Capital's multistrategy hedge fund Double Black Diamond.

Principal Real Estate Investors received a $200 million allocation to invest in U.S. industrial properties. At least 75% of the separate account will be invested in core, stable, income-producing buildings; the remainder will be invested in valued-added industrial redevelopment opportunities.

Northern Trust Global Investments and Russell Investments were approved as transition managers. The two firms replace Credit Suisse Asset Management and J.P. Morgan Asset Management (JPM), which both have exited the transition management business. The pension fund's three other pre-approved transition managers are State Street Global Markets, Citigroup and Loop Capital Markets.

Rob Kozlowski contributed to this story.