Illinois Teachers alters fixed-income subasset classes in move to simplify
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Deborah Pederson and David J. Rothenberg
      Arena hires 3 to boost global marketing of private credit strategies
      BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
      watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • Senate Majority Leader Chuck Schumer, D-N.Y., wears a protective mask while departing the U.S. Capitol
      Senate virus relief bill drops retirement plan COLA freeze
      A pharmacist administers a dose of the COVID-19 vaccine in Mountain Brook, Ala., on Feb. 21, 2021
      Business optimism grows as vaccinations spread – Fed
      watch video
      0:59
      Coronavirus and the S&P 500: February 2021
      Multiemployer pension measures cleared for relief bill vote
    • Desktop with document showing pie chart with investment types along with a calculator
      OECD proposes revision of its DC ‘good design’ roadmap
      Dominic Scriven, director and portfolio manger of Dragon Capital, speaks during an interview in Ho Chi Minh City, Vietnam in 2006
      Vietnam gets its first private defined contribution plan
      DCALTA releases daily valuation tool for alts in DC plans
      PSCA: Employee participation in non-qualified deferred comp plans rising
    • The tower of Stockholm City Hall rise above the city's skyline on Aug. 6, 2020
      Swedish funds managing $250 billion get slammed for ESG record
      Vapor rises from a petrochemical plant
      New York State Common inks more climate pacts
      Michael Herskovich
      BNP Paribas Asset Management names global head of stewardship
      TPT Retirement taps into low-carbon strategies
    • 2 U.K. pension execs take on ESG investing in new podcast
      Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
      Spirit winners
      Prudential honors young people who are helping out
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • The tower of Stockholm City Hall rise above the city's skyline on Aug. 6, 2020
      Swedish funds managing $250 billion get slammed for ESG record
      Louisiana Teachers rehires Mondrian as small-cap manager
      CalSTRS adds alts investments to ESG-themed portfolio
      Vapor rises from a petrochemical plant
      New York State Common inks more climate pacts
    • Manulife taps UBS veteran to oversee its China business
      Herman Bril
      Arabesque Asset Management chooses first CEO
      Railpen hires head trader in preparation for in-house trading
      Andy Moniz
      Acadian picks responsible investing director
    • CalSTRS adds alts investments to ESG-themed portfolio
      District of Columbia Retirement Board executive director to retire
      Police car in the city of San Antonio
      San Antonio fund terminates Lazard from emerging markets strategy
      Fresno County Employees moves $22 million between Eaton Vance funds
    • District of Columbia Retirement Board executive director to retire
      Deborah Pederson and David J. Rothenberg
      Arena hires 3 to boost global marketing of private credit strategies
      Manulife taps UBS veteran to oversee its China business
      Herman Bril
      Arabesque Asset Management chooses first CEO
    • The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
    • AEW chooses head of fund operations and debt finance
      Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      David Ireland
      Sponsors returning to questions about in-plan annuities
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Louisiana Teachers rehires Mondrian as small-cap manager
      University of Louisville taps Cammack as DC plans consultant
      Cook County allocates $50 million to Mesirow funds
      South Carolina earmarks up to $355 million to 6 funds
    • Louisiana Teachers rehires Mondrian as small-cap manager
      University of Louisville taps Cammack as DC plans consultant
      Cook County allocates $50 million to Mesirow funds
      South Carolina earmarks up to $355 million to 6 funds
    • Independent Investment Consulting Services
      Financial Auditing Services
      Actuarial Services
      Emerging Market Equity Manager Services
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Investment Trends: Looking Ahead Across Equity Sectors
      Rethinking Market and Reference Data Management
      China is embarking on a new stage of growth
      Gold Outlook 2021
    • Sameer Shalaby
      Commentary: Why should investors care about treasury management?
      David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      ESG Capabilities and Climate Impact Investing
      Technology is the New Oil: The Changing Nature of Emerging Markets
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top Performing Managers of Domestic Limited-Duration Fixed Income, 4th Quarter 2020
      Top Performing Managers of Domestic Value Equity, 4th Quarter 2020
      Top Performing Managers of Global Balanced, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      ESG Capabilities and Climate Impact Investing
      Technology is the New Oil: The Changing Nature of Emerging Markets
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. ASSET OWNERS
November 10, 2014 12:00 AM

Illinois Teachers alters fixed-income subasset classes in move to simplify

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Michael A. Marcotte
    R. Stanley Rupnik called the changes merely 'a simplification of the existing structure.'

    The $45.3 billion Teachers' Retirement System of the State of Illinois continues to slide its global fixed-income portfolio ever closer to the cutting edge of bond management.

    The 2015 fiscal year strategic plan for the portfolio is characterized by moves to simplify the subasset class structure, Scottie Bevill, senior investment officer, said during an investment committee meeting Oct. 29.

    Fixed income has a target weighting of 16% of the Springfield-based plan's total assets. That isn't changing, although the composition of the subasset class weightings will.

    As of June 30, the actual breakdown of the $7.7 billion portfolio was core plus, 38%; global, 20.6%; emerging markets, 11.4%; short-term/other, 9.2%; duration tactical, 8.1%; special situations, 8%; U.S. TIPS, 4.5%; and core, 0.2%.

    The new structure collapses the current eight subasset classes into four with the following target weights: beta plus, 55%; global, 33%; special situations, 12%; and short-term asset reserves, zero.

    “This move really is ... a simplification of the existing structure. The change is consistent with how staff has viewed the asset class for some time, and provides better flexibility in the current environment,” R. Stanley Rupnik, chief investment officer, said in an interview.

    During his presentation to the investment committee, Mr. Bevill said unconstrained bond portfolios with sufficient liquidity are “likely to produce the best risk-adjusted returns (in fiscal year 2015) because their flexibility allows tactical rotation among various sectors and countries, and to allocate between risk assets.”

    As a result of the revamp, fixed-income staff will have the ability to move the target allocation to Pacific Investment Management Co.'s unconstrained bond strategy from zero to 80%. PIMCO's core-plus (total return) strategy allocation range is 20% to 100%. As of June 30, TRS had $593 million invested in PIMCO's core-plus strategy and $559 million in the unconstrained strategy.

    Mr. Rupnik said the change is based on staff's desire to reduce beta exposure within the fixed-income portfolio.

    “Both PIMCO strategies remain important components of the fixed-income portfolio, with staff simply recommending increased exposure to the unconstrained (strategy) at this time. The previous range allowed for up to 50% in unconstrained,” Mr. Rupnik said. He noted TRS investment staff might not push the unconstrained strategy to its upper limit, “but it does provide PIMCO and staff the flexibility based on market conditions.”

    After spirited discussion, the investment committee approved Mr. Bevill's recommendations for changes to the fixed-income portfolio as well as investments in other asset classes. The full board gave final approval to investment changes affecting more than $1 billion during its Oct. 30 meeting.

    Fixed-income changes

    Manager-specific fixed-income changes included promotion of active bond manager Garcia Hamilton & Associates LP from the pension fund's $732 million emerging managers program to manage a full-size 4% allocation — about $300 million in current dollars.

    The restructuring cut Hartford Investment Management Co. 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 Mr. Rupnik.

    PIMCO and New Century Advisors LLC continue to manage $586 million and $268 million, respectively, in global inflation-protected securities portfolios.

    Trustees ratified the addition of LSV Asset Management to the fund's global equity portfolio. Investment staff used their discretion to hire LSV 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 large-cap value equity managers Affinity Investment Advisors LLC and Lombardia Capital Partners LLC each received $25 million allocations from the emerging managers program for domestic and international portfolios, respectively.

    After another lively discussion, the TRS trustees approved the following commitments to private equity and real assets managers:



    • up to $100 million to Siris Partners III, a follow-on to the $12.5 million commitment made to Siris Partners II. With the large new allocation, private equity manager Siris Capital Group LLC was moved from the emerging managers program;

    • up to $100 million to a customized Asia-focused private equity separate account strategy and an additional $100 million to a companion co-investment vehicle, both managed by Asia Alternatives Management LLC; and

    • $30 million from the real assets portfolio to the Taurus Mining Finance Fund, managed by Taurus Funds Management Pty. Ltd.

    Trustees also ratified staff-initiated co-investments of $18.5 million and $20 million, respectively, to existing managers The Carlyle Group and NGP Energy Capital Management LLC.

    Custody services

    Separately, during an investment committee review of the fund's 2014 fiscal year-end reports, Mr. Rupnik told trustees 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.

    Also, Mr. Rupnik announced to trustees that finalists for a real estate consultant search will be presented to the investment committee during the board's Dec. 10-12 meeting. The five-year contract of Callan Associates Inc. expires Dec. 31.

    Related Articles
    Illinois Teachers maps out 2015 real estate, hedge fund deployments
    Illinois Teachers to stay with 9 PIMCO strategies for now
    Illinois Teachers trustees approve $1 billion in asset moves
    Illinois Teachers taps new real estate consultant, makes several new hires, com…
    Illinois Teachers preps private equity consultant, emerging markets manager sea…
    Illinois Teachers launches large-cap core, private equity consultant searches
    Illinois Teachers chalks up $600 million in commitments to 4 managers
    Recommended for You
    Asset owners record 9.4% gain in Q4
    Asset owners record 9.4% gain in Q4
    Asset owners focus more on stewardship despite obstacles – survey
    Asset owners focus more on stewardship despite obstacles – survey
    Retirement adequacy and sustainability suffer in coronavirus pandemic - report
    Retirement adequacy and sustainability suffer in coronavirus pandemic - report
    How will gold react?
    Sponsored Content: How will gold react?
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Rethinking Market and Reference Data Management
    Investment Trends: Looking Ahead Across Equity Sectors
    China is embarking on a new stage of growth
    Gold Outlook 2021
    Shifting DC Times - Winter 2021
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center