Illinois State Universities Retirement System, Champaign, terminated U.S. structured equity portfolio managers Jacobs Levy Equity Management and Pacific Investment Management Co. to fund its first-ever hedge fund allocation with $495 million.
Jacobs Levy managed $322 million; PIMCO managed $254 million in its StocksPlus strategy, both as of Dec. 31.
The action was taken at a Feb. 4 committee meeting, according to recently released minutes.
SURS, which oversees $15.7 billion in defined benefit assets, plans to allocate $297 million to KKR Prisma and $198 million to Pacific Alternative Asset Management Co., both hedge fund-of-funds managers, which SURS hired in October, pending contract negotiations.
SURS plans to use the remaining $81 million in proceeds to meet other funding obligations.
Jacobs Levy and PIMCO's terminations were the result of an implementation of a new asset allocation adopted in 2014 and not because of performance.
With the terminations, SURS will reduce its U.S. equity allocation to 26% from 29%, while allocating 3% to hedge funds, a new asset class. Under the new asset allocation, SURS plans eventually to lower U.S. equity to 23%, while raising the hedge fund allocation to 5% and real estate to 10% from 9%.
PIMCO continues to manage three fixed-income portfolios, whose combined value is $1.2 billion.
Separately, SURS terminated for performance Taplin, Canida & Habacht, which managed $128 million in core-plus fixed income.
SURS reallocated the proceeds to two existing managers: $78 million to Metropolitan West Asset Management, raising its core-plus fixed-income portfolio to $562 million; and $50 million to Garcia Hamilton & Associates, raising its core fixed-income portfolio to $151 million.
Scott M. Kimball, portfolio manager at Taplin, Canida & Habacht, declined to comment.
In addition, SURS hired private equity firm Muller & Monroe Asset Management to managed a $100 million fund of funds made up of underlying emerging managers. The hiring is pending contract negotiations, W. Bryan Lewis, SURS executive director, said in an e-mail.
NEPC, investment consultant for the pension fund, assisted with the changes.
Mr. Lewis couldn't be reached for comment regarding the hedge fund and Taplin Canida & Habacht moves.