Teachers' Retirement System of Illinois, Springfield, soon will search for managers for two fixed-income allocations - $800 million in active domestic core plus and $600 million in domestic enhanced index. Consultant Gordon Dickinson of the Chicago office of Callan Associates will conduct the searches.
Trustees of the $34 billion plan likely will review finalists at their Dec. 10 meeting. The moves followed the board's approval on Friday of a structural change in the plan's fixed-income portfolio, moving to active management from passive and increasing the active core-plus bond allocation to 70% of the system's $4 billion fixed-income allocation, from 50%, said Stan Rupnik, CIO.
Funding for the enhanced portfolio will come from passive managers State Street Global Advisors and Northern Trust, which manage $540 million and $82 million, respectively. Funding for the additional allocation to core fixed income likely will come from rebalancing and possibly from reductions of other managers, both bond and equity, Mr. Rupnik said.
Also, LM Capital was terminated for performance of a $190 million active domestic core fixed-income portfolio. The money was moved to Taplin, Canida & Habacht, which already manages $190 million in a similar strategy for the system, Mr. Rupnik said. John Chalker, managing director and co-founder of LM Capital, was could not be reached by press time for comment.
Separately, staff members are preparing a structural review of the plan's domestic equity allocation for the board's Dec. 10 meeting, Mr. Rupnik said. Among the changes could be reallocation of $755 million from an active domestic large-cap equity portfolio managed by Bear Stearns, terminated for performance and organizational reasons, Mr. Rupnik said. "We are disappointed with their decision," said Russell Sherman, a Bear Stearns spokesman. "We believe there was insufficient time to adequately judge the fund's long-term performance. We hope they will reconsider their position sometime in the future."
The system also will search for general investment and specialist private equity consultants, Mr. Rupnik said. Callan's general consulting contract is up at the end of the year, he said; the firm may rebid. Mr. Rupnik said the system wants a specialized private equity consultant as its allocation to the asset class increases in size and complexity. RFPs for both consultant searches will be available in the next few days on the plan's website, trs.illinois.gov.