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Illinois Teachers commits to 2 funds, lowers assumed rate of return

Illinois Teachers' Retirement System approved a total of $150 million for two commitments to existing managers from the $44.2 billion pension fund's private equity portfolio.

Trustees approved a $100 million commitment to Veritas Capital Fund V, at their board meeting on Tuesday at the pension fund's Springfield headquarters, a news release stated. TRS committed $75 million to an earlier vintage Veritas Capital Fund Management private equity fund.

The board also gave the nod to a $50 million commitment to Sofinnova Venture Partners IX. Sofinnova Ventures already manages $40 million for the teachers' fund in a previous venture capital fund.

In other news, the assumed rate of return for the pension fund was lowered to 7.5% from 8%, the release said.

After a review of the pension fund's asset-liability model by the fund's actuary, Buck Consultants, and amended capital market assumptions from its investment consultant, R.V. Kuhns & Associates, trustees approved the change to the assumed rate.

“The assumed rate of return greatly influences the financial future of TRS,” said Richard W. Ingram, the pension fund's executive director, in the release. “It is the fiduciary duty of the board to set a rate that is realistic,” he added.

Separately, based on an R.V. Kuhns review, trustees approved new long-term asset allocation targets, the first such change since 2011.

The new targets are:

  • domestic and international equity, 18% each, down from 20% each;
  • real estate, 15%, up from 14%;
  • private equity, 14%, up from 12%;
  • real return, 11%, up from 10%;
  • global fixed income remained at 16%; and
  • hedge funds remained at 8%.

Finally, trustees approved the hire of ConvergEx Group for commission recapture services. The pension fund began a commission recapture program in 1986 and previously used a pool of brokers to advise investment staff on the process.