Pension Funds

Illinois Muni commits up to $250 million in alternatives, reduces assumed rate of return to 7.25%

Commitments include a joint venture with former NBA star 'Magic' Johnson

Illinois Municipal Retirement Fund, Oak Brook, on Friday approved a total of up to $250 million in alternatives commitments, including an infrastructure investment to a joint venture that includes a firm owned by retired NBA star Earvin "Magic" Johnson.

A commitment of up to $25 million was approved to JLC Infrastructure Fund I, managed in a joint venture between Magic Johnson Enterprises and investment bank Loop Capital Partners. The fund targets core-plus and value-added middle-market investments with an emphasis on public-to-private partnerships, said Dhvani Shah, Illinois Municipal chief investment officer.

Illinois Municipal is the first public pension fund to commit to the JLC fund, Ms. Shah said. "We want to get in on the ground floor," she said.

The $40 billion pension fund issued an RFP for a closed-end unlisted infrastructure manager on Sept. 12.

Also, the board approved commitments of up to $75 million each for middle-market buyout funds Baring Private Equity Asia Fund VII, Waud Capital Partners Fund V and Vistria Fund III, managed by Vistria Group.

Illinois Municipal has previous investments with the three buyout firms, with one fund each in Baring Private Equity Asia and Waud and two Vistria funds.

IMRF had 4% of assets invested in alternatives as of Sept. 30. Its target allocation to alternatives is 7%.

Also Friday, the board voted to change IMRF's assumed annualized rate of return to 7.25% from the current 7.5%.

Brian Collins, IMRF executive director, told the board that the plan's member employees were contacted and from those that commented, there was "a sense of grudging inevitably of this."

"We've been at 7.5% since 1992," Mr. Collins said. "That conservative position has served us very well. But everyone out there knows one of the big variables out there is assumed rate of return. That has to be credible for our funding level to be credible."

Also on Friday, actuary Gabriel Roeder Smith was approved for 2019, but the board also approved issuing an RFP for an actuary to serve in 2020. No date for the RFP was set.