Teachers' Retirement System of the State of Illinois, Springfield, completed a revamp of its active domestic large-cap value equity portfolio, hiring two new managers and permitting a long/short extension for an existing manager.
At a Feb. 26 board meeting, trustees of the $32 billion system approved the hiring of Loomis Sayles to manage a 3% allocation of the fund's domestic equity target, currently about $260 million, in active domestic large-cap value equities.
Denali Advisors, which managed $39 million in active domestic large-cap value equities, was graduated out of the system's emerging managers program and awarded a 2.25% slice of the domestic equity allocation. Denali will be awarded an additional $160 million to bring the mandate up to the target.
Funding for both managers will come from reducing to 4.75% from 7% a similar-style portfolio run by Dodge & Cox, which had $648 million as of Dec. 31.
Also hired to manage $50 million in active domestic large-cap value equities was Lombardia Capital Partners, with funding coming from TRS' $500 million emerging managers program. Lombardia has managed $40 million in active domestic small-cap value equities within the emerging managers program since November 2008.
In addition, the investment mandate of Robeco Boston Partners, which managed $461 million in active domestic large-cap value equities at Dec. 31, was altered to allow the manager to use a 130/30 approach. TRS will gradually move the account into the long/short approach, starting with $100 million. Boston Partners will continue to manage the remaining $360 million using its present long-only strategy.
Other changes to the system's equity portfolio included the termination of BlackRock Inc. from a domestic enhanced index equity account that totaled $644 million on Dec. 31. It had been run by BGI, which BlackRock now owns. Kent Custer, senior investment officer-global equity and absolute return, said the termination was the result of organizational concerns and performance. Bobbie Collins, a BlackRock spokeswoman, declined comment.
Some of the assets redeemed from BlackRock will fund increases in the targets for active internal small-cap equity managers American Century and Putnam Investments to 3% — about $192 million each — of TRS' $6.4 billion international equity allocation. Previous target weightings were 2.5% for American Century and 2% for Putnam. As of Dec. 31, American Century managed $176 million and Putnam, $153 million.