Illinois State Board of Investment, Chicago, raised its allocation to hedge funds and restructured its fund-of-funds strategies to loosen constraints, while terminating two managers, William R. Atwood, executive director, said in an interview.
ISBI raised the hedge fund allocation to 10% of its $13.4 billion in assets.
It raised allocations to Rock Creek Group and Entrust Partners to $502 million, or 3.75% each, of total assets, and Mesirow Advanced Strategies to $335 million, or 2.5%, from $425 million, $411 million and $271 million, respectively.
ISBI will permit Rock Creek, Entrust Partners and Mesirow to move into credit strategies in addition to their existing strategies of hedged equity, mostly long/short strategies. Rock Creek and Mesirow also will be permitted to invest in global macro strategies.
ISBI made the move to enhance expected returns and diversification. The firms manage hedge funds of funds.
Funding came from terminating IronBridge Capital Management, which ran $182 million in active U.S. small-cap core equities, and Credo Capital Management, which managed $71 million in active U.S. midcap growth equities.
Both were terminated for performance. Christopher C. Faber, IronBridge president and portfolio manager, and Tedd M. Alexander III, Credo founder, managing member and portfolio manager, couldn’t be reached for comment.
In addition, ISBI restructured its $200 million emerging markets index fund. It dropped a State Street Global Advisors-managed MSCI Emerging Markets index fund, moving all its proceeds to create an SSgA-managed MSCI Emerging Markets Small-Cap index fund.
ISBI, which has exposure to large-cap emerging markets equities through its international allocation, made the move “to further diversity and more fully participate in future growth,” Mr. Atwood said in an e-mail.
In addition, an SSgA-managed Russell 2000 index fund will get $32 million of the IronBridge proceeds, raising it to $305 million.
Marquette Associates, ISBI’s investment consultant, assisted with the changes.