Illinois pension builds diversity commitment, adds alts managers

The $54 billion Illinois Teachers’ Retirement System (TRS) Board of Trustees boosted the size of the pension system’s emerging manager program from $750 million to $1 billion.

The Trustees also approved the issuance of a RFP seeking consulting services to help TRS develop a standardized measurement and evaluation tool for diversity, equity and inclusion opportunities.

The boost is part of a “multi-pronged reimaging” of the 15-year-old program and the system’s efforts to increase diversity following Illinois State Senate hearings with pension systems about increasing diversity in pension investment management.

The December 3 and 4 hearings included testimony on the importance of accountability and the need for diversity from the top down. Included were Illinois State Treasurer Michael Frerichs, Chicago Teachers’ Pension Fund, Illinois State Board of Investments, Laborers’ Annuity and Benefit Fund of Chicago, Municipal Employees’ Annuity and Benefit Fund Chicago, and the Illinois Teachers’ Retirement System.

Officials at Springfield-based TRS said that the pension fund increased participation in the portfolio by minority and women-owned business enterprises. The program’s graduates and participants are not managing more than $3.5 billion in TRS assets.

“The objective of the EMP (emerging manager program) always has been to invest in promising, developing asset managers and to create meaningful, long-term relationships. Further, it allows TRS to focus on identifying and sourcing underrepresented minority and female-owned managers,” said Acting TRS Executive Director Stan Rupnik. “Moving forward, the program intends to adopt a broader definition of diversity and to find diverse managers that meet the needs of our portfolio.”

Over the last five years, the total percentage of assets in the Illinois Teachers’ portfolio managed by MWBE firms has grown by 17.9%, officials said adding that commitments now total $12.6 billion.

TRS said it plans to increase diverse hiring across asset classes, updating internal diversity selection metrics, better measurement and monitoring of diversity and inclusion practices with money management firms, and expanding the reach of the annual TRS Opportunity Forum.

Meanwhile another $475 million went to alternative investment strategies during the December board meeting.

The largest allocation was a $300 million commitment to Starwood Capital Group within the real assets portfolio that totals $8.2 billion. Starwood already manages $650 million in TRS assets.

Then within the $6.6 billion private equity program, Bertram Capital Management was hired to manage a commitment of up to $75 million, which would be TRS’ first investment with the firm.

Lastly, the investment team mad substantive changes within the diversifying strategies portfolio, which includes manage futures managers and hedge funds. TRS opted to redeem from Informed Portfolio Management ($225 million) and Man Group ($175 million). Both were full redemptions.

An add-on commitment was made however to Aspect Capital totaling $100 million, which is on top of its already $253 million in TRS assets.

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