Illinois State Board of Investment, Chicago, increased by $100 million each allocations to existing separate account real-estate managers ING Clarion and CB Richard Ellis, but made CBRE's new funding contingent on a restructuring of compensation.
The new funding raises ISBI's commitment to each to $400 million.
The board of the $10.1 billion fund threatened to reassign to another manager CB Richard Ellis' new funding unless company executives change the compensation arrangement for Troy Jenkins, portfolio manager on the account, to more of a performance-based fee than an asset-based one.
Board members haven't decided how they would reallocate the $100 million if Mr. Jenkins' compensation arrangement doesn't change. The board could hire a new real estate manager, or give the money to ING Clarion, said William R. Atwood, executive director. The board expects to make a decision on CBRE in June.
Townsend Group, ISBI's real-estate consultant, recommended the change in compensation terms to better align the interests of both the firm and the fund. The board authorized Townsend to negotiate a new arrangement.
“Under the agreement we have, the main portion is an asset-based fee,” said Mr. Atwood, who added he isn't familiar with the specifics of the compensation arrangement at the firms.
Mr. Jenkins was out of the office and unavailable for comment. Pam Barnett, CBRE director of communications, didn't' respond to requests for comment.