Trustees of the $49.1 billion defined benefit plan approved the redemption in executive session during the board's March 14 meeting.
TRS has been invested in the Capri separate account since December 1991, making it the pension fund's longest-held real estate investment. The investment in the Capri fund as of Dec. 31 represented 14.3% of the pension plan's $7.4 billion real assets portfolio and is the second-largest single investment in the portfolio, a board report showed.
Trustees made the decision to terminate Capri "with regard to management of this portfolio. Discussions about its future are ongoing," said David Urbanek, TRS' spokesman. Mr. Urbanek declined to comment further.
Capri Capital Partners also suffered another large redemption on Jan. 31 when the $55.8 billion Los Angeles County Employees Retirement Association transferred management of four apartment properties valued at a total of $535 million from a separate account managed by Capri to existing real estate manager DWS Group.
The combined $1.6 billion of redemptions from Illinois Teachers and LACERA represents roughly 42% of the $3.7 billion in gross assets that Capri Investment Group, the firm's parent company, said on its website that it managed as of Sept. 30.
In response to a request for comment about the pension funds' terminations, Capri Investment Group Chairman and CEO Quintin E. Primo III said in an email: "TRS has indicated verbally to us that the termination is a result of two factors: The recent departure of a portfolio manager and the resultant concentration of TRS assets with Capri due to LACERA's transfer of core assets. Performance was not mentioned as an issue."
Mr. Urbanek declined to comment.
Trish Hoffman, a Capri Investment Group spokeswoman, said she could not name the departed portfolio manager because of employee confidentiality concerns.
LACERA's investment staff recommended transferring the four apartment building properties from Capri's separately managed account to DWS because "Capri's performance track record for core investments is highly variable, with three of the four assets underperforming and the fourth 'carrying' the other three," Chief Investment Officer Jonathan Grabel said.
Mr. Grabel made his comments in a report prepared for the fund's Sept. 12 board meeting, which was obtained by Pensions & Investments.
Although LACERA did not terminate its $45 million investment in Capri's Urban Investors close-end commingled fund, Mr. Grabel told trustees in his report that the fund "has substantially underperformed its goal."
Mr. Grabel said staff also were concerned about personnel turnover at Capri and "the impact this may have on asset management."
Going forward, Capri's investments for LACERA will be limited to apartment and mixed-use properties, Mr. Grabel told trustees.
Capri will continue to provide investment advisory services to LACERA, Mr. Primo said, noting that "we have been allowed to specialize in multifamily development investment transactions, where there is mutual agreement that the firm has performed well. Given our concerns about the overall state of core real estate markets in the U.S., we will be highly selective in pursuing new development transactions for this client."
Jonathan Grabel, LACERA's chief investment officer, could not immediately be reached for comment about the pension fund's changes to its Capri investments.
Going forward, Mr. Primo said Capri is "shifting its business and investment model to pursue direct multifamily and mixed-use development in diverse, supply-constrained urban markets," which will provide the firm with higher fee margins.
He added that when the new strategy is "executed in newly created opportunity zones as a result of the 2017 Tax Cut and Jobs Act, it is also an area we believe the firm is uniquely qualified to pursue."