Illinois Municipal Retirement Fund taps 4 managers for infrastructure

Illinois Municipal Retirement Fund, Oak Brook, on Friday hired infrastructure managers Cohen & Steers, Brookfield Investment Management, Oaktree Capital Management (OAK) and Partners Group to run a total of up to $650 million, subject to contract negotiations.

Cohen & Steers will manage $300 million and Brookfield will run $150 million, both in publicly traded global infrastructure. Up to $100 million each will be committed to an Oaktree transportation and energy infrastructure fund and Partners Group Direct Infrastructure 2016, said Dhvani Shah, chief investment officer.

The four managers will be the first for the $37.6 billion pension fund in infrastructure, which is part of the new 2-percentage-point public real assets suballocation in IMRF's new 38% target U.S. equity portfolio. The changes are part of a new asset allocation approved by the IMRF board Nov. 16.

Funding will come from reductions in U.S. equity, which as of March 31 was overweight its 38% target by 6 percentage points.

No managers were terminated, Ms. Shah said. An RFP was issued Feb. 1. The search was conducted internally.

Separately, the pension fund terminated BlackRock (BLK) from a $750 million active core-plus fixed-income portfolio. Ms. Shah said the move is to follow an asset allocation shift, moving about 2 percentage points in total assets to core fixed income from core-plus. Also, the moved will reduce management fees, Ms. Shah said. She said there was no issue with BlackRock's performance.

Most of the assets, a total of $600 million, will be moved to three minority-owned active core fixed-income managers that currently run portfolios for IMRF, with $200 million each going to Garcia Hamilton & Associates, Piedmont Advisors and EARNEST Partners.

The remaining $150 million will be managed in either BlackRock's U.S. debt index strategy or the Northern Trust's Bloomberg Barclays U.S. Aggregate Bond index fund. Which strategy will be selected has yet to be determined, Ms. Shah said.

Garcia Hamilton and Piedmont currently each manage $553 million, and EARNEST runs $552 million.

With the increases, IMRF will have $7.9 billion managed by minority-owned firms across a variety of asset classes.

Separately, the pension fund returned a net 11.96% for the 12 months ended March 31, according to a report from Callan Associates, IMRF's investment consultant. IMRF's custom benchmark returned 10.41% for the same period.

As of March 31, the pension fund returned a net 5.37% for three years, 8.34% for five years and 6.1% for 10 years. The corresponding benchmark returns for the time periods were 6.28%, 8.11% and 6.2%, respectively. Multiyear returns are annualized.

For the first quarter, IMRF returned a net 4.14%, above the custom benchmark's 3.96%.

U.S. equity was the top-performing asset class for IMRF in the 12 months ended March 31, with a net 19.59% return, followed by international equity with 12.15%; alternatives, 7.82%; real estate, 7.72%; and fixed income, 3%.

Janet Becker-Wold, Callan senior vice president, said strong small-cap equity performance, with the Russell 2000 up 26.2% for the 12 months, drove IMRF's U.S. equity gains. The pension fund's domestic equity allocation has a small-cap bias.

IMRF's asset allocation as of March 31 was 44% domestic equity (38% target), 27% fixed income (29% target), 19% international equity (16% target), 5% real estate (8% target) and 3% alternatives (8% target). The remainder of the allocation is in cash.