Updated with correction
Illinois Teachers' Retirement System, Springfield, plans to deploy a total of at least $1 billion with real estate and hedge fund managers in the fiscal year ending June 30, 2015.
Trustees of the $45.3 billion pension fund approved the 2015 tactical investment plans for the $5.6 billion real estate portfolio and the $2.6 billion hedge fund portfolio as presented by investment staff at a board meeting Tuesday.
The real estate tactical plan calls for total new investment of $850 million in fiscal 2015 — $550 million will go to opportunistic strategies and $300 million to core/value-added approaches. Additional opportunistic real estate managers will be sought.
Funding for the new real estate hires will come from rebalancing other asset classes. How many real estate managers will be sought and the timing of the search process was not specified by TRS internal staff or its consultants.
For the core allocation, trustees accepted the tactical plan's suggestion to increase existing core/value-added manager Invesco Real Estate's portfolio by $300 million. The market value of Invesco's investments totaled $671 million as of June 30.
Two to three non-directional hedge fund strategies for core portfolio allocations of between $150 million and $200 million each will be sought in the current fiscal year, the tactical plan showed.
Funding for the new hires will be drawn from assets being liquidated from hedge funds-of-funds manager K2 Advisors, which was terminated by the pension fund in December. The former K2 portfolio totaled $532 million as of June 30.
The timing and process for the hedge fund manager searches was not specified during the board meeting.
Separately, the board terminated Loomis Sayles & Co. for management of an active U.S. large-cap value equity strategy that accounts for about 2.7% of the $9.5 billion global equity portfolio, or $255 million.
Bill Thomas, investment officer for domestic equities, said the termination is part of the investment team's decision to “reduce the volatility of this mandate,” noting that “we want large-cap value to do more to provide downside capture” than the Loomis Sayles strategy offers.
The Loomis Sayles allocation will be placed with a transition manager and not traded until the portfolio is handed over to a new manager, Mr. Thomas said. Finalists for a replacement manager will be presented to the board at its Oct. 29-31 meeting, he said.
In further news from the global equity portfolio report, Channing Capital Management, one of the 19 managers in TRS' $750 million emerging managers program, received a boost from the board in its target allocation to $100 million. The pension fund's original $25 million investment in Channing's active U.S. small-cap value equity strategy had grown to $47 million as of June 30.
The board also accepted the resignation of Sky Investment Counsel, which managed $31 million as of June 30. Chuck Handy, investment officer for international equities, told trustees that Sky Investment Counsel is leaving the investment management business because its largest investor, which accounted for about 80% of the firm's total assets, withdrew its assets.
