Illinois State Board of Investment, Chicago, plans to allocate $960 million in proceeds from a state pension bond sale to index funds and some active managers, bringing both close to their allocation targets, said William R. Atwood, executive director of the $10.2 billion board.
The $960 million could come from the board's share of a possible sale by the state of up to $4.1 billion state bond sale, Mr. Atwood said in an interview.
Proceeds will go in large part to buy back stocks and bonds the board has sold since July 1 to pay pension benefits because the state hasn't made any of its required contributions to the state retirement systems, he said.
Proceeds could go to RhumbLine Advisers, which manages four index funds — a $630 million S&P 500 fund, a $520 million Russell 1000 value fund, $368 million Russell 1000 growth fund and a $77 million Russell 2000 value fund — and State Street Global Advisors, which manages a $512 million MSCI ACWI ex-US index fund, Mr. Atwood said.
Eventually, ISBI would redeploy the proceeds to active managers from the index funds. But LSV Asset Management, which manages $463 million in active large-cap value domestic equities, and Chicago Equity Partners, which manages $900 million in active intermediate government and credit fixed income, could also receive some of the proceeds immediately, depending on their capabilities to invest the new funds, Mr. Atwood said.
The board plans to hold off on new investing in private equity and real estate for at least six months because of the liquidity issue caused by the lack of state pension contributions this fiscal year and the uncertainty about state contributions for the next fiscal year, beginning July 1.
ISBI expects it would receive proceeds in March if the General Assembly approves the pension bond sale in the next week, Mr. Atwood said.
State Senate President John J. Cullerton “fully expects to have a vote” on a bill to sell the bonds before the General Assembly concludes its session Jan. 11, said John Patterson, deputy press secretary for Mr. Cullerton. Mr. Patterson said an exact date wasn't available.
The state House passed the pension bond bill 71-44 on May 25.
The board oversees the investments of the Illinois State Employees' Retirement System, the Illinois Judges' Retirement System and the Illinois General Assembly Retirement System.
