IMRF boosts fixed income to trim equity overweight
Illinois Municipal Retirement Fund, Oak Brook, will move $475 million to three existing fixed-income managers as the $35.6 billion pension fund looks to reduce its 5.7-percentage-point overweight in U.S. equities.
The IMRF board on Friday approved moving $200 million to a core-plus fixed-income portfolio run by emerging manager of managers Progress Investment Management, raising it to $818 million; adding $150 million to Garcia Hamilton & Associates in a core fixed-income account, increasing it to $248 million; and boosting Babson Capital Management's global loan fund by $125 million to $304 million.
Funding will come from reducing U.S. equity allocations of five managers by a total of $800 million. The board trimmed $200 million from both Wall Street Associates' microcap growth strategy, reducing it to $278 million, and Investment Counselors of Maryland's small-cap value portfolio, leaving it with $584 million.
Another $150 million was cut from Holland Capital Management's large-cap growth strategy, reducing it to $817 million, and $125 million each was moved from Sands Capital Management's large-cap growth strategy, leaving it with $1.19 billion, and Franklin Capital Management's small-cap growth portfolio, leaving it with $858 million.
Within U.S. equities, the board also shifted $125 million to Northern Trust Investments in an S&P 500 value index fund, raising it to $907 million. The remaining $200 million from U.S. equities will be moved to cash.
Dhvani Shah, chief investment officer, said the moves were made not only to bring the fund's U.S. equity allocation closer to its 38% target, but also to reduce the allocation's bias to small-cap and growth equities.
The small-cap bias specifically “did reward us in terms of return,” Ms. Shah said. “The idea is to still maintain that, but we wanted to bring that and growth back just a little.”
IMRF's target allocation to U.S. equity has a plus-or-minus 4-percentage-point range. Its fixed-income portfolio is 0.7 percentage points below its 27% target.
Separately, the board approved increasing by $10 million the pension fund's commitment to Vistria Fund, a midmarket buyout fund run by emerging private equity manager Vistria Group that focuses on health care, education and financial services. The total commitment now is $15 million.
Also, the pension fund returned 0.44% on its investments in the quarter ended June 30 vs. its custom benchmark's 0.19% return, according to a report from Callan Associates, IMRF's investment consultant.