By Greg Hinz
CHICAGO — Illinois' big new investments in its employee pension funds are paying off so far, thanks in part to a decision by fund managers to reject political pressure to play it safe.
The funds received a $7.3 billion windfall on July 2 from a state bond issue crafted by state Budget Director John Filan, and he strongly urged the fund managers to steer clear of riskier equity investments (Pensions & Investments, June 23).
Instead, the five funds did the opposite. They put most of the money into equities and equity index funds just when, as it turns out, the domestic stock market was poised to begin a major move up.
As a result, the funds collectively boosted their net assets more than $2.5 billion in the four-month period ended Oct. 31, with total investment returns of 6% to 7.55% — the funds' best return since the heady days of the late 1990s and 2000.
"Timing is everything," said Timothy Blair, acting director of the Pension Laws Study Commission, a Springfield, Ill., legislative monitoring group. "I'm glad they didn't stick it in a money market fund."
But a spokeswoman for Mr. Filan said he made the right move in urging the funds to take it slow after losing billions of dollars in stock investments in prior years. Although the funds have done well in the past quarter or so, "it could have gone the other way," said the spokeswoman, hinting that Mr. Filan next year might seek to revive legislation that would sharply boost his control over the funds.