updated with correction
Illinois State Board of Investment, Chicago, hired State Street Global Advisors to manage $200 million in a U.S. small-cap core equity index fund and $150 million in an emerging markets equity index fund, said William R. Atwood, executive director of the $10.8 billion ISBI.
Funding for the small-cap core fund could come from reducing allocations across U.S. active large-cap equity managers; none will be terminated. They are LSV Asset Management, which manages $442 million in value, and core managers Herndon Capital, $76 million, and Decatur Capital, $10.5 million.
Funding for the emerging markets fund will come from reducing an MSCI ACWI ex-US index fund run by SSgA to $490 million.
The small-cap core fund will be benchmarked to the Russell 2000 Stock index and the emerging markets index fund to the MSCI Emerging Markets index.
The hirings are the result of separate searches, issued in summer. The board generally wanted to shift away from active management and large-cap equity to improve return, Mr. Atwood said.
The emerging markets fund is ISBI's first portfolio dedicated to emerging markets. The board increased its emerging markets equity target allocation to 5% of its total fund, from 3%, now all handled by managers of non-U.S. developed markets equity as part of their portfolios.
Marquette Associates, the board's investment consultant, assisted with both searches.