Trustees of the $49.9 billion Illinois Teachers' Retirement System, Springfield, approved a search for a private debt consultant at a board meeting Thursday.
The timing of the search has not been set, but Greg Turk, director of investments, during an investment committee meeting the same day, told trustees that staff would like to conduct an open search that could include managers of discretionary investment platforms as well as investment consultants.
Mr. Turk said the fund's hedge fund consultant, Albourne Partners, has helped make "a great initial push by helping to source private debt managers, but a specialist consultant would enhance the process to get us to a higher allocation."
Trustees also approved the fiscal year 2018 tactical plan for private debt that would raise the target allocation by 5 percentage points to 30% of the fund's $9.4 billion global fixed-income portfolio. As of Sept. 30, TRS' private debt portfolio — including direct lending, distressed, structured credit, specialty finance and real estate debt — totaled 14.6% of the overall fixed income allocation.
The investment pacing plan for the private debt portfolio over the next three fiscal years ending June 30, 2020, would earmark about $350 million a year with a total of $750 million to $950 million. The breakdown by subasset class over the three years would earmark a total of up to $350 million to direct financing strategies and up to $150 million each to real estate debt, credit events, specialty areas and customized strategies.
Trustees also approved the 2018 tactical plan for the fund's $18.6 billion global equity portfolio, which combines the $8 billion domestic equity and $10.6 billion international equity portfolios effective Jan. 1. The benchmark for the combined portfolios will be the MSCI World Investible Market index, Bill Thomas, global equity investment officer, told trustees during the investment committee meeting. The domestic and international portfolio target weightings will be the same as those of the index in a range of plus or minus 12.5 percentage points, Mr. Thomas said.
The tactical plan includes reducing by one the number of managers of active U.S. large-cap growth equities; a $200 million portfolio managed by J.P. Morgan Asset Management will be terminated. T. Rowe Price Group will receive $140 million of the proceeds from the JPMAM liquidation, bringing its active, large-cap U.S. equity portfolio to $622 million. The balance will go into cash, Mr. Thomas said.
In other news from the meeting, trustees granted full investment discretion over all investments to the TRS investment team in accordance with the fund's asset allocation and annual asset class tactical plans.
Previously, staff had discretion over hiring, terminating, increasing and decreasing allocations and rebalancing of managers of traditional asset classes, with approval of the investment committee chair and subsequent ratification by the board of trustees at their next meeting.
Staff now have complete investment discretion over manager activity in all asset classes, including alternatives such as private equity, real estate and hedge funds.
However, investment staff will seek board permission for investments that are above a set limit by manager or asset class, or if an investment is controversial, R. Stanley Rupnik, chief investment officer, assured trustees during an investment committee meeting.
Trustees will receive full activity reports from staff about investment changes on a timetable that is still to be determined.
