Illinois State Universities Retirement System, Champaign, hired BlueBay Asset Management, Prudential Fixed Income, Colchester Global Investors and Progress Investment Management to manage a total of $520 million in emerging markets debt, said Daniel L. Allen, SURS chief investment officer.
The move is SURS' first specific allocation to emerging markets debt.
SURS, which manages $16.7 billion in defined benefit assets, allocated $175 million each to BlueBay and Prudential, $105 million to Colchester and $65 million to Progress, Mr. Allen said in an e-mail. Progress will use its allocation to seed an emerging markets debt fund of funds using investment managers owned by minorities, women or people with disabilities. SURS expects the managers to use some combination of dollar and local currency investments for their portfolios to reduce its total risk and enhance diversification.
Funding is expected to come from pulling out $175 million from a Northern Trust Asset Management Dow Jones U.S. Total Stock Market index fund, which had $1.9 billion; $100 million from a Blackrock international alpha tilts structured equity fund, which had $446 million; $75 million from a BlackRock ACWI ex-U.S. index fund; which had $1.4 billion; $70 million from a RhumbLine Advisers customized Wilshire 5000 index fund, which had $1.2 billion; and $50 million each from a PIMCO StocksPlus structured U.S. equity portfolio, which had $392 million, and a Jacobs Levy Equity Management structured U.S. equity portfolio, which had $398 million. The existing portfolio values are as of Nov. 30.
SURS might modify funding as needed based on its asset allocation at the time of the funding of the managers, which SURS expects to take place in spring, Mr. Allen said.
The moves fund SURS' 3% emerging markets debts allocation, created by reducing non-U.S. equity to 19% from 20% and as part of a reduction of the U.S. equity allocation to 23% from 32%.
An RFP was issued last year. NEPC, SURS' investment consultant, assisted in the search.