Illinois investment board might add hedge fund-of-funds manager

Illinois State Board of Investment, Chicago, could search for a hedge fund-of-funds manager as part of a restructuring of its $1.1 billion in hedge fund strategies, said William R. Atwood, executive director.

ISBI, which oversees $12.9 billion in defined benefit assets, plans to loosen constraints on its hedge fund investments, all funds of funds, to add global macro and credit strategies.

The board is considering three options for implementation: loosening constraints of all the fund-of-funds managers — Rock Creek Group, which manages $428 million; Entrust Partners, $418 million; and Mesirow Advanced Strategies, $273 million — all now in hedged equity, mostly long/short strategies; loosening the constraints of some of them; or leaving them unchanged and searching for a fourth fund-of-funds manager.

Funding for a new manager would come from reducing the portfolios of the three existing managers, Mr. Atwood said. ISBI has no plans to increase its hedge fund allocation; no manager would be terminated.

ISBI is planning the move to increase returns and enhance diversification, Mr. Atwood said.

ISBI expects investment consultant Marquette Associates to present recommendations on how to proceed Sept. 27. A search, if approved, would be done later this year.