Illinois State Board of Investment, Chicago, rejected consultant Marquette's asset allocation recommendation, saying it sacrificed too much return for little reduction in risk. The board of the $8.3 billion plan ordered Marquette to suggest another allocation that provides at least the current expected return of 10.4%, while optimizing risk.
Marquette's primary recommendation produced an expected return of 9.98% and a downside risk of 1.12%. Marquette measured the board's current downside risk at 1.15%.
Marquette recommended an allocation of 45% U.S. equities, 25% fixed income, 10% international equities, 10% real estate, 5% private equity, and 5% hedge funds. The current target is 46% U.S. equities, 23% fixed income, 15% international equities, 8% real estate, and 8% private equity.
The board might consider new allocation recommendations in December.