Illinois Teachers' Retirement System's trustees authorized two searches during a jam-packed board meeting Thursday at the Springfield headquarters of the $43.5 billion pension fund.
A search for active large-cap international equity managers is planned in 2016 “to replace one or more” of the existing managers in the pension fund's $8.3 billion non-U.S. equity portfolio, said Greg Turk, director of investments, during the fund's investment committee meeting Wednesday.
The second search will seek transition managers, including a firm with capability to handle private equity transitions, to bulk up the pension fund's pool of approved companies, said R. Stanley Rupnik, chief investment officer.
Two of the six managers approved in 2012 to handle transition management — Credit Suisse Asset Management and J.P. Morgan Asset Management — closed their transition businesses in 2013.
“We want to have five transition management firms,” Mr. Rupnik said, adding that the remaining incumbent managers State Street Global Markets, Citibank, Loop Capital and Russell Investments will be invited to rebid.
The timing and contract details of the two RFPs haven't been set.
Separately, trustees approved investment and commitment recommendations from the staff totaling up to $1.43 billion to 15 new and existing managers; terminations of four investments totaling $719 million; and reductions totaling $400 million for two managers.
Private equity and venture capital received a total of $635 million earmarked for nine strategies.
Two managers received first-time commitments: Battery Ventures will split a $30 million commitment between Battery Ventures XI and Battery Ventures XI Side Fund, with the possibility of an additional $10 million commitment; and TC Growth Partners I received a $25 million commitment from TRS' $734 million emerging managers program.
Two co-investments were committed to existing private equity managers: up to $25 million to an investment in Veritas Technologies connected to Carlyle Partners VI, managed by Carlyle Group; and up to $40 million to in Korean hypermarket Home Plus made through MBK Partners III.
Commitments to new funds managed by existing private equity and venture capital managers were:
- up to $200 million to Green Equity Investors VII, managed by Leonard Green & Partners;
- up to $75 million to Madison Dearborn Capital Partners VII, managed by Madison Dearborn Partners;
- up to $150 million to Advent Global Private Equity VIII, managed by Advent International;
- up to $50 million to Longitude Venture Partners III, managed by Longitude Capital Management; and
- $20 million each to Lightspeed Venture Partners XI and Lightspeed Select Fund II.
Also, following a search earlier this year, trustees rehired private equity co-investment advisors LP Capital Advisors, Stout Risius Ross and TorreyCove Capital Partners, and added Caledon Capital Management to the roster.
In other alternative investment asset classes, up to $50 million was committed to Oak Street Real Estate Capital Fund III from the emerging managers program.
In hedge funds, $235 million was set aside for Crabel AlphaTerra Advanced Trend Program, with an initial investment of $100 million. The fund is a commodity trading adviser, managed by Crabel Capital Management.
Trustees also ratified the redemptions of three hedge fund investments: BlueMountain Capital Management's Credit Alternatives Fund, $264 million; Pine River Capital Management's Pine River Fund, $217 million; and Claren Road Asset Management's Credit Partners Fund, $76 million.
Kenneth L. Musick, investment officer-diversifying strategies, told trustees the BlueMountain and Pine River funds had suffered from style drift, while Claren Road Asset Management had suffered well-publicized corporate issues.
Douglas Hesney, a spokesman for BlueMountain, declined to comment, as did Patrick Clifford, a spokesman for Pine River.
The redemptions will be used to fund new hedge fund investments.
Grosvenor Capital Management's saw its hedge fund-of-funds strategy reduced by $100 million, to $300 million as part of the plan to increase TRS' direct investments in hedge funds.
As part of the “ongoing credit theme,” from Scottie Bevill, senior investment officer-fixed income and real return, trustees approved investing $150 million in NXT Capital Senior Loan Fund IV and $100 million in PIMCO Corporate Opportunities Fund II, managed by Pacific Investment Management Co.
In traditional equity, active U.S. smidcap growth equity manager Apex Capital Management was graduated from the emerging managers' program to regular manager status. TRS will bump up Apex's allocation million to $186 million from $29 million.
Strategic Global Advisors, which runs an active international all-cap equity strategy, was awarded an additional $100 million, bringing its total managed to $480 million. Boston Co. Asset Management was terminated for underperformance of a $162 million active U.S. smidcap growth strategy. Melissa Cassar, a Boston Co. spokeswoman, did not provide a comment by press time.
Also, Aberdeen Asset Management's active large-cap international equity portfolio was reduced by $300 million, to $500 million after a period of underperformance.
Katie Cowley, an Aberdeen spokeswoman, declined to comment.
Separately, Rebecca A. Gratsinger, CEO of RVK and the fund’s lead consultant, presented trustees with the annualized performance of the fund for periods ended Sept. 30: three months, -4.3% (benchmark, -3.9%); one year, 1 % (0.9%); three years, 8.6% (8%); five years, 9.2% (8.5%); 10 years, 6.3% (5.9%); and 20 years, 7.8% (not available).