Illinois TRS Commits Nearly $6 Billion | Chief Investment Officer

The Teachers’ Retirement System of Illinois reported making nearly $5.8 billion of new investment commitments between February and May of this year, as well as two significant terminations.

The fund also reported assets totaling $66.1 billion as of March 31 and a 4.2% return net of fees through three quarters of fiscal year 2022.

“The ‘defensive’ and value-aware investment strategy TRS has employed for some time is paying off for our members,” said Stan Rupnik, executive director and CIO for TRS, in a statement.

As of the end of March, the fund’s real assets investments were up to $11.9 billion, from $9.1 billion as of the end of fiscal year 2021.

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In addition, since February of this year, the fund approved the following new commitments totaling $400 million:

$300 million to Blackstone, which currently administers $776.3 million in TRS assets; and
$100 million to Gateway Capital, which currently administers $50 million in TRS assets.

In private equity, as of March, TRS investments totaled $10.4 billion, up from $10.17 billion as of the end of fiscal year 2021.

The fund also announced the following new private equity commitments, totaling $1.1 billion, between February and May this year:

$125 million to Advent International Corp., which currently manages $230 million in TRS assets;
$150 million to Arlington Capital Partners, which currently manages $90 million in TRS assets;
$200 million to EQT Fund Management, which currently manages $200 million and €410 million in TRS assets;
$100 million to Francisco Partners, in a new investment relationship for TRS;
€75 million to Providence Strategic Growth Capital Partners, which currently manages $75 million in TRS assets;
$200 million to RCP Associates, which currently administers $750 million in TRS assets;
$125 million to SK Capital Partners, which currently administers $120 million in TRS assets;
$200 million to Veritas Capital Fund Management, which currently administers $550 million in TRS assets; and
$14 million to Grain Management, which currently administers $119 million in TRS assets.

In public equity, the fund’s portfolio totaled $22.5 billion at the end of March, down from $22.8 billion at the end of the prior fiscal year.

The fund reported new public equity commitments of $1.6 billion made between February and May, as follows:

$400 million to Causeway Capital Management;
$400 million to J.P. Morgan Investment Management, which currently administers $840 million in TRS assets;
$400 million to T. Rowe Price Associates, which marks a renewed investment relationship for TRS; and
$400 million to William Blair Investment Management.

TRS also announced two terminations within its public equity portfolio:

Two passive growth strategies administered by RhumbLine Advisors; which continues to administer $9.9 billion in TRS assets; and
A domestic large capitalization value strategy of LSV Asset Management, which continues to administer $1.5 billion in TRS assets.

TRS reported a drop in its diversifying strategies portfolio, with total assets of $5.5 billion as of the end of fiscal 2021, dropping to $4.9 billion by the end of March. This includes the full redemption of $250 million from Light Sky Macro.

TRS reported an increase in its global income portfolio, with total assets of $16.3 billion at the end of March, up from $15.5 billion at the end of fiscal 2021.

The fund also announced new commitments of $1.9 billion to the following managers in global income:

$100 million to Pharmakon Advisors, a women or minority-owned business enterprise, in a new investment relationship for TRS;
$150 million to Cerberus Capital Management, which currently manages $419.6 million in TRS assets;
$75 million to Dignari Capital Partners, a WMBE firm that currently administers $22.7 million in TRS assets;
$100 million to Edelweiss Alternative Asset Advisors, a WMBE firm that currently administers $71 million in TRS assets;
$25 million to L2 Point Capital, a WMBE firm, in a new investment relationship for TRS;
$350 million to $400 million to Payden & Rygel, a WMBE firm;
$250 million to Apollo Global Management, which currently administers $850.8 million in TRS assets;
$150 million to Beach Point Capital Management; which currently administers $434.2 million in TRS assets;
$200 million to Hayfin Capital Management, which currently administers $268.9 million in TRS assets;
$225 million to Intermediate Capital Group, which currently administers $440.3 million in TRS assets; and
$225 million to Pacific Investment Management Company, which currently administers $2.2 billion in TRS assets.

Tags: Illinois, Illinois Teachers’ Retirement System, Private Equity, Public Equity, Real Assets

The California Public Employees’ Retirement System’s new asset allocation, which increases its alternative investments while reducing its public equity holdings, takes effect July 1.

“Over the past decade we’ve made strides to improve our funded status and reduce investment risk,” CalPERS said in a tweet. “We’ve increased liquidity, taken more defensive positions in the public markets and added a prudent amount of leverage to increase diversification.”

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After nearly a year of reviewing the pension system’s investment portfolio and actuarial liabilities, the CalPERS board decided in November to adjust the asset allocation of its $442 billion portfolio by increasing its private equity weighting and decreasing its public equity holdings. The board also approved adding 5% leverage to increase diversification.

The new asset allocation target is 42% in global equity, 30% in fixed income, 15% in real assets, 13% in private equity and 5% in private debt. CalPERS said the allocation adds up to 105% due to the 5% allocation to leverage. The current target asset allocation is 50% global equity, 28% fixed income, 13% real assets, 8% private equity, 1% liquidity and 0% in private debt. According to CalPERS’ most recent monthly update, the portfolio’s actual asset allocation as of May 31 was 45.5% in public equity, 27.1% in fixed income, 14.6% in real assets and 11.7% in private equity.

Although the change goes into effect today, “it will not be like flipping a switch,” a CalPERS spokesperson says. For example, if the investment team doesn’t immediately see any strong private equity investments, the staff will have to wait before they increase their investments to private equity.

“It’s a balance of aligning as close as possible to the new allocation, while also considering the current market and making the best decision to achieve the strongest returns/balancing risk for the fund,” says the spokesperson.

The review process that went into the decision to adjust the allocation, which takes place every four years, included a review of demographic assumptions, including life expectancy, retirement and disability rates and potential changes in job growth and salaries, according to CalPERS. A press release from the fund says the board examined different investment portfolios and their potential impact to the CalPERS fund, and that each portfolio presented a different mix of assets and corresponding rate of expected return and risk volatility. The release also says that CalPERS’ most recent findings show that life expectancies of healthy members at age 55 increased slightly from the last study in 2017, as men are expected to live approximately eight months longer and women five months longer since the previous study.