The 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 & Co. to manage a 3% share of the fund's domestic equity target, 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 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.
In fixed income, TRS trustees committed $100 million to Oaktree Capital Management's Oaktree PPIP Private Fund. Funding for the hire will come from the reduction of Goldman Sachs' active core plus bond fund target allocation to 17% from 19.5%. Goldman Sachs managed about $1 billion in the strategy as of Dec. 31.
Oaktree also received TRS commitments to distressed debt private equity funds with $100 million to Oaktree Opportunities Fund VIII and $50 million to the Oaktree Opportunities Fund VIIIb. TRS committed $75 million to Veritas Capital Fund IV, a private equity fund focused on investments in companies servicing the U.S. military. Funding for all three commitments will come from cash, passive or enhanced index accounts or from rebalancing.