Illinois Teachers' Retirement System, Springfield, took action on assets totaling just more than $1 billion at its board meeting Thursday.
Trustees of the $43.5 billion pension fund ratified the hire of LSV Asset Management by investment staff in August to manage $360 million in active domestic large-cap value stocks. LSV, which already managed $1.3 billion for TRS in two other equity strategies, replaced Loomis Sayles & Co., which was terminated in August.
Active bond manager Garcia Hamilton & Associates, was promoted from the pension fund's $732 million emerging managers program to manage a 4% allocation from the fund's $7.7 billion fixed-income portfolio. The $61 million Garcia Hamilton previously managed will be returned to the emerging managers program. Funding for the new account will come from reducing Prudential Investment Management's core-plus bond portfolio and rebalancing among other fixed-income managers.
Siris Capital Group also graduated from the emerging managers program with a commitment of $100 million to its technology-focused private equity fund, Siris Partners III. TRS invested $12.5 million in Siris Partners II.
TRS committed up to $200 million to a customized Asia-focused private equity strategy managed in a strategic partnership by Asia Alternatives Management. The allocation will be split evenly between a diversified fund of funds and a co-investment fund. The goal is to eventually move some of the Asian private equity managers from the fund of funds into TRS' direct investment portfolio, Stefan Backhus, private equity investment officer, told trustees.
Taurus Funds Management, a new manager for the TRS, received a $30 million commitment to its Taurus Mining Finance Fund.
Active large-cap value equity managers Affinity Investment Advisors and Lombardia Capital Partners each received $25 million commitments from the emerging managers program for domestic and international portfolios, respectively.
Trustees ratified staff-initiated co-investments of $18.5 million and $20 million to existing managers Carlyle Group and Natural Gas Partners, respectively.
Funding for the Siris, Asia Alternatives, Taurus, Affinity, Lombardia, Carlyle Group and Natural Gas Partners hires will come from cash, index funds and rebalancing.
In further changes to the fixed-income portfolio, Hartford Investment Management was terminated as manager of a $350 million U.S. Treasury inflation-protected securities portfolio. Investment staff “believes the net-of-fees results from these mandates can be improved through two mandates. Further, staff prefers to utilize global inflation-linked mandates, while Hartford's portfolio is U.S. only,” said R. Stanley Rupnik, chief investment officer, in an answer to a request for clarification.
Pacific Investment Management Co. and New Century Advisors continue to manage $586 million and $268 million, respectively, in global inflation-protected securities portfolios.
Scottie Bevill, senior investment officer for fixed income, told trustees that TRS' fixed-income strategic plan for fiscal year 2015 includes replacing an existing short-term investment fund manager with a floating-rate manager.
Mr. Rupnik clarified that the staff wants to create a diversified short-term investment fund management portfolio that will balance liquidity needs with the ability to achieve additional income through active investment.
Mr. Bevill didn't give a time frame for the potential search. State Street Global Advisors, a subsidiary of TRS' custodian, State Street Bank & Trust, manages $90 million in a STIF fund and Taplin Canida & Habacht manages $575 million in a customized floating-rate strategy.
Mr. Rupnik told trustees that the staff is considering issuing an RFP for custodial services but has to wait until new risk management and reporting systems are installed. That might mean a delay in issuing a possible RFP for anywhere from six to 18 months.
State Street has been providing custody services to TRS for about five years and does not have a fixed-term contract.
“We negotiated an evergreen contract with State Street so we would have the flexibility to make changes when we want to. But we can't make a shift now,” Richard W. Ingram, executive director, told trustees.