In the $6.3 billion international equity portfolio, a three-percentage-point allocation was moved to emerging markets manager Aberdeen Asset Management Inc. to bring its target allocation to 7.5%, an increase of $173 million. The move decreased Grantham, Mayo, Van Otterloo & Co.'s emerging markets target allocation to 9% from 12%. As of Sept. 30, Aberdeen managed $303 million in active emerging markets equity, and GMO managed $701 million.
TRS staff is considering a move to add passive emerging markets exposure before the end of the June 30 fiscal year but is not ready to request a manager search, Mr. Custer said during the meeting.
Mr. Custer is leaving the system to become CIO of College Illinois, the $1.1 billion 529 prepaid college tuition plan run by the Illinois Student Assistance Commission, Chicago, on Dec. 27, confirmed John Samuels, an ISAC spokesman.
Zak Doehla, senior investment officer-private equity, on the other hand, will head up the system's efforts to search for a fourth adviser to assist the investment staff in sourcing co-investment opportunities. The RFP will be posted on the fund's website, http://trs.illinois.gov, in the near future.
In November 2010, the board approved the appointment of Houlihan Lokey, LP Capital Advisors LLC and TorreyCove Capital Partners LLC as co-investment advisers.
On the advice of Houlihan Lokey, staff recommended and trustees on Dec. 13 ratified private equity co-investment commitments of $23.5 million in Emdeon Inc., a health-care payment systems provider, and $45 million to Summit Midstream Partners, a gas pipeline developer, made by the system's investment staff.
With the new investments, Illinois Teachers' co-investment program commitments and investments total about $177 million, bringing the program close to its goal of reaching $200 million by the end of the fiscal year on June 30.
Also in private equity, the board committed of up to e50 million ($66 million) to Rhone Partners IV, which invests in middle-market Pan-European and transatlantic companies.
Trustees also accepted the recommendation of Mr. Doehla to renew TRS' venture capital investment program, which has been quiet for the past three and a half years.
In order to bring the fund's venture capital exposure closer to the 10% upper limit of the target allocation for the asset class, Mr. Doehla said between $75 million and $125 million will be invested over the next three years.
As of Sept. 30, the system had $835 million, or about 2.5% of total assets, invested in venture capital strategies, according to board meeting materials.
Trustees approved the first step in the venture capital ramp-up with a commitment of up to $100 million in Morgan Creek Partners Venture Access Fund I, a customized separate account fund of funds.
Illinois Teachers' private equity investments, including venture capital, totaled $3.7 billion as of Sept. 30, according to board presentation materials from the fund's general consultant, R.V. Kuhns & Associates Inc.
In other alternative investment news, a $200 million commitment was made to Blackstone Real Estate Partners VII fund, a value-added opportunistic strategy that invests in distressed and undermanaged properties worldwide. Between 80% and 85% of the Blackstone fund likely will be invested in the U.S. The teachers' fund had $54 million invested in Blackstone Real Estate Partners VI fund as of Sept. 30.
Another $150 million was approved for a direct hedge fund investment in the Pine River Fund, a global multistrategy relative value portfolio run by Pine River Capital Management LP.
Funding for both hires will come from cash, passive/enhanced index accounts or rebalancing.
Within the system's emerging manager program, trustees accepted a staff recommendation to move a total of $38 million into a new enhanced return core-plus bond strategy managed by LM Capital Group LLC. The bulk of the money, $28 million, came from LM Capital's opportunistic core fixed-income strategy. The remaining $10 million was a new allocation.
Emerging manager Channing Capital Management LLC received $30 million for its active U.S. small-cap intrinsic value strategy. The source of the funding is the RhumbLine S&P 500 index fund dedicated to the system's $500 million emerging managers program.
Separately, R.V. Kuhns reported that the pension fund's third-quarter return was -8.86%, underperforming the fund's internal benchmark by 45 basis points.
Steve Daniels, a reporter for Crain's Chicago Business, a sister publication of Pensions & Investments, contributed to this story.