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Pension funds

Illinois Municipal mulling internal management for some equity investments

Dhvani Shah, chief investment officer, Illinois Mu
Dhvani Shah, chief investment officer, Illinois Municipal Retirement Fund

Illinois Municipal Retirement Fund, Oak Brook, is considering managing some of its equity investments internally.

The $41.3 billion pension fund could put an as-yet-undetermined amount of assets into an internally managed factor-based domestic equity strategy, Chief Investment Officer Dhvani Shah said Thursday at the board's investment committee meeting. All of the pension fund's assets are currently managed by external managers and it does not have an allocation to factor-based equity strategies. IMRF had 43.8% of total assets in domestic equity as of June 30.

"It's another level we can add to get a strategy we don't have at a lower cost," Ms. Shah said, adding that expected cost savings of internal management vs. hiring an external firm is driving the consideration to take such investment in-house.

The pension fund won't internally manage its passive equity strategy, she said, because the fees IMRF pays for passive equity strategies are competitive and the plan is unlikely to realize cost savings by managing them internally.

Ms. Shah stressed that the proposal is only preliminary and that details still need to be determined.

The committee and Brian Collins, executive director, recommended that Ms. Shah make a request for internal management, including the cost of hiring of a portfolio manager, in the budget for 2019, to be presented later this year.

Separately, IMRF returned a net 1.53% in the second quarter and 9.33% for the 12 months ended June 30, according to a quarterly investment report presented to the pension fund board Friday by investment consultant Callan. The respective custom benchmark returns were 1.24% and 7.82%.

As of June 30, the pension fund returned a net 7.26% for three years vs. the benchmark's 7.17% return; 8.66% for five years vs. 8.31%; and 7.45% for 10 years vs. 7.16%. All multiyear returns are annualized.