Illinois State Universities Retirement System’s investment committee recommended the system’s staff identify and evaluate additional active core-plus fixed-income managers to address concerns raised regarding the extensive reliance on Pacific Investment Management.
"We like (PIMCO) but we have more exposure than we like,” said John R. Krimmel, chief investment officer of the $11.5 billion Champaign-based fund. PIMCO manages $1.7 billion, or 65% of the system’s $2.6 billion in active fixed income.
A board discussion on adding one or more core-plus managers likely will occur in September. In a core-plus style, a manager is benchmarked to the Lehman Aggregate bond index, plus has the discretion to add — typically up to 30% of the total portfolio — high-yield and international fixed income.
The staff plans to look initially at six managers and see what develops in its evaluation before it considers a full search. It isn’t soliciting calls at this time. Managers being considered include Western Asset Management and TCW. Mr. Krimmel said news of Société Générale’s purchase of TCW is new factor to consider. BlackRock Financial Management, which already manages $757 million in two non-core fixed-income strategies for the fund, also is being considered.
The new manager or managers might start with $50 million or $75 million total, with prospect of the assignment rising to $500 million to $700 million in a few years.
