Illinois Teachers Hires Alts. Managers, Retains Private Equity Advisor

May 23 2007 | 10:53am ET

The $39.7 billion Teachers’ Retirement System of the State of Illinois has made its initial allocations to the absolute return and real return asset classes, just added to the system’s investment portfolio in December 2006, the pension fund said.

TRS’s board of trustees hired funds of funds managers K2 Advisors and Grosvenor Capital Management to each manage $250 million mandates and real return managers AQR Capital Management ($250 million) and Bridgewater Associates ($500 million). In addition, PIMCO was hired to manage $400 million in global inflation linked bonds.

The system will fund the mandates with cash, passive/enhanced index accounts and the rebalancing of other active public managers. TRS expects to take up to three years to fully fund the target allocations, which stand at 2.5% of the total fund for absolute return and at 10.0% of the total fund for real return investments.

“These managers will carefully select a diverse array of products within these new asset classes, which are designed to achieve enhanced returns and minimize overall investment risk,” said TRS executive director Jon Bauman. “TRS will employ risk controls and consistent monitoring in order to provide the necessary oversight of these new investments.”

In private equity, TRS’ board has voted to retain PCG Asset Management as its private equity consultant. PCG was initially hired in May of 2006 but subsequent staff departures from the firm prompted TRS to issue a request for proposal for a p.e. consultant in December. “TRS has confidence in PCG’s new corporate structure, its research capabilities, and the expertise of its investment professionals,” said TRS CIO Stan Rupnik. “TRS has developed a strong, professional relationship with PCG and we are pleased to continue the relationship with the organization.” 

In addition, the system’s board made $425 million in p.e. commitments to Carlyle Partners V, L.P. ($200 million), MatlinPatterson Global Opportunity Partners III ($100 million), New Mountain Partners III ($100 million), and Evergreen Partners V ($25 million to, L.P). The system will fund all of its p.e. mandates with cash and passive/enhanced index accounts. 

TRS had $1.5 billion invested in private equity as of March 31, or nearly 4% of its total portfolio.


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