Illinois Teachers’ Retirement System, Springfield, will search for an active international bond manager to manage as much as $546 million for the $32.1 billion system, confirmed Stan Rupnik, chief investment officer and acting executive director.
On Thursday, trustees approved the recommendation of a structural review of TRS’ 17% fixed-income allocation to increase the active international fixed-income allocation to 20% of total bond assets, up from 13%. The new manager will run between 7% and 10% of the international bond allocation; staff will decide later whether to equal weight the portfolio of the new manager and existing active international bond manager, Franklin Portfolio Advisors, which managed $772 million as of March 31.
Funding for the new international bond manager will come from rebalancing and an as-yet-undetermined reduction in the enhanced fixed-income strategy managed by Prudential, which totaled $1 billion as of March 31.
Mr. Rupnik said information about how managers can submit their details for the search, which will be conducted with the assistance of R.V. Kuhns, will be on the system’s website, http://trs.illinois.gov, within two weeks. The board likely will interview finalists at its August meeting.
Trustees also approved a search for a private equity co-investment adviser. The new adviser will provide independent third-party fiduciary evaluations of potential direct co-investment opportunities to TRS staff and private equity consultant PCG, Mr. Rupnik said.
An RFP will also be posted on the system’s website within two weeks, and the search is expected to be concluded at the board’s August meeting.
Also at Thursday’s board meeting, Davis Hamilton Jackson was hired to manage $25 million in active domestic core-plus fixed income. Funding will come from the system’s $500 million emerging managers program.
As part its ongoing private equity investment program, the system committed up to $100 million to SKBHC Holdings, which targets rescuing failed community banks in the Midwest, Northwest and Western states over the next three years, and $75 million to Littlejohn Fund IV for investment in middle-market firms that are underperforming or financially distressed.
EARNEST Partners, which had managed $155 million in U.S. core-plus fixed income, was terminated for performance reasons, Mr. Rupnik confirmed. The assets will be distributed to other bond managers, Mr. Rupnik said. Trey Greer, a partner at EARNEST Partners, did not return a call seeking reaction.
Illinois Teachers’ nine-month return as of March 31 was 19.6%, well above the 17.2% return of the system’s customized benchmark. Its fiscal year ends June 30.