The board of the Teachers’ Retirement System of the State of Illinois approved a new asset allocation plan at its June 18 board meeting, with the aim of enhancing the pension fund’s liquidity, as well as protecting the portfolio from volatile markets.
As a part of the new asset allocation target, the fund will raise its long-term target allocation to diversifying strategies to 6% from 4%. The fund currently has a 2.2% asset allocation to this asset class, with interim and long-term target allocations of 5% and 4% respectively.
The fund aims to decrease its long-term target for fixed income by 2 percentage points, from a target of 26% to a target of 24%. The fund currently allocates 28.5% of its assets to its income portfolio, which includes the funds fixed income holdings.
In the long term, the fund aims to increase its allocation to public equities and lower its allocation to private equity. The fund currently allocates 34.6% of its portfolio to public stocks, and 17.1% to private equity, with long-term targets of 37% and 15% respectively.
The fund anticipates its real assets portfolio will remain relatively unchanged, with a current allocation of 17.7%, TRS has a long-term target of 18%, however plans to increase its real estate assets to 16% from 14.8% and decrease other real assets to 2% from 2.9%.
“Our investment strategy prioritizes protecting our members’ money because they count on us every month,” said Stan Rupnik, executive director and CIO of TRS, in a news release. “We continue to see growth within our investment portfolio, while working to minimize the impact of market volatility. This approach has successfully delivered results for our more than 448,000 members.”
At the end of the first quarter, assets of the pension fund reached $70.4 billion. At the end of May, the fund’s assets reached a high of $70.98 billion. The fund manages retirement benefits for more than 448,000 beneficiaries, current and retired educators and education personnel in Illinois.
The pension fund, like many Illinois suffers from being severely underfunded; TRS had a funded ratio of 44.8% at the end of fiscal year 2023. With such a low ratio, liquidity is increasingly important with the fund’s significant liabilities.
Manager Selection & New Commitments
The board of the pension fund also approved up to $570 million in commitments to new and existing and new private equity, real assets and fixed income investment managers.
As a part of its private equity portfolio, the fund made $95 million in commitments to managers. The fund made a $30 million commitment to existing manager Bregal Sagemount, a middle-market growth equity investor.
The pension fund also approved a $50 million commitment to Singapore-based TPG Partners, a new relationship with the pension fund and $15 million to existing emerging manager Mac Venture Capital.
The fund only made one commitment for its real assets portfolio; committing up to $300 million to Starwood Capital Group, which already manages $817.9 million of the fund’s assets.
The fund made commitments to two managers for its global income portfolio. It committed $75 million to public finance investor Fundamental Advisors, and another $100 million was made to Sixth Street Advisors, both existing managers for TRS.
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Tags: Illinois, Teacher’s Retirement System Board of Trustees, Teachers' Retirement System of the State of Illinois, TRS