Teachers' Retirement System of the State of Illinois, Springfield, terminated ING Investment Management, which ran $450 million in core-plus fixed income, for organizational and performance concerns. ING had been on watch since May 2008.
Assets eventually will be distributed to other bond managers that are underweight relative to their target allocations. ING spokeswoman Tracey Gordon declined to comment.
Separately, Becky Gratsinger, CEO of investment consultant R.V. Kuhns & Associates Inc., told the board of the $29.1 billion system at its Feb. 18-19 meeting that the TRS fund returned -13.66% in the fourth quarter, compared to -14.79% for the fund's custom benchmark. For the year ended Dec. 31, fund investments returned -27.11%, vs. the benchmark's -26.59%. Annualized returns for the TRS fund were -2.35% for three years; 2.86% for five years; and 4.12% for 10 years. Custom benchmark returns for the same periods were -2.9%, 2.12% and 2.89%, respectively.
The system also selected State Street Corp.'s STIF fund residual cash management and to invest securities lending cash collateral in a separate account equivalent to the bank's Quality A Fund. The board made the move as part of its transition to State Street Corp. as global custodian.
The board voted during its meeting to notify the fund's previous custodian, Northern Trust, to cease securities lending on its behalf and to recall all securities currently on loan. Trustees also voted to remove Northern Trust from its commission recapture program.
CIO Stan Rupnik told trustees he estimates that the transition to State Street from Northern Trust will be completed by April 1.
Trustees increased the allocations of three existing global macro/global tactical asset allocation managers in the system's real return asset class, which has a target allocation of 7.75% or $2.3 billion of total assets. Bridgewater's allocation from the real return asset class increased to 40% from 17.5%; Wellington was raised to 35% from 17.5%; and AQR's target was increased to 25% from 6.25%.
As of Dec. 31, Bridgewater managed $433 million for TRS; Wellington, $275 million; and AQR, $207 million.
Partial funding will come from rebalancing $220 million from the fund's two global inflation-linked managers Western Asset Management and PIMCO. As of Dec. 31, Western managed $302 million and PIMCO managed $288 million in global TIPS. The balance of the new GTAA targets will come from distribution of an allocation of an undisclosed size that had been set aside for the hire of a fourth manager in this asset class with which trustees decided not to go forward.
Stone Levy was terminated for management of $216 million of real estate assets, which will be transferred to existing manager Cornerstone Real Estate Advisors. Trustees did not discuss a reason for the change.