Alternatives Watch 2022 Outlook: Illinois Municipal Retirement Fund

In our second installment of our AW Outlook Series, we look at the long-term investment decisions one public pension fund CIO is making as the macroeconomic picture shifts in the U.S.

Last August, Angela Miller-May took the helm of the Illinois Municipal Retirement Fund (IMRF) as its chief investment officer. The best-funded public pension fund in the state, the role has allowed Miller-May to lead the $54 billion state-wide system in re-evaluating its asset allocation.

Prior to joining the IMRF, she led the Chicago Teachers’ Pension Fund as CIO. Before that she worked in the financial services industry, including for Chicago-based Northern Trust Company.

Series Sponsors

Over the next 12 months, how are you formulating your portfolio allocations? What is top of mind?

This year has started off in a volatile state at no surprise to investors.  We are currently analyzing our asset allocation and making marginal changes in an effort to add more defense without sacrificing returns.  Top of mind for us, of course, is the current inflation spike, increasing rates, sectoral shifts and lowered return expectations predicted by our capital market assumptions.  Generally, we’re implementing added balance between our U.S. equities and international equities, shifting to more liquid, and higher returning fixed income strategies.  Lastly, we’re mostly maintaining our private equity and real assets allocations with very small changes. 

We’ll continue to follow our pacing studies to reach our current allocations of 10% in alternatives and 10% in real estate and look for opportunities to balance sector specific strategies with broad diversified strategies.  We are global investors in strategies such as venture capital, buy-out, special situations, industrials, multifamily, needs-based retail and modern office (tech, bio and medical office).

As we approach the third year of the pandemic, what are your thoughts about the macroeconomic picture?

I think that the economy is strong but fragile.  Jobs are plentiful in certain industries and geographies while scarce in others.  We’ve yet to see the full impact of Omicron and the ever-changing mandates around vaccinations and mask wearing. U.S. debt has increased as the Fed has increased the money supply through stimulus programs and bond buying.  Will tax increases be far behind?  The pending rate increases along with inflation are the most concerning for asset allocation and portfolio construction.  As a strategic investor, we’ll continue to be disciplined to our asset allocation policy and not reactive to market movements and macro events, by prudently de-risking when appropriate and selectively taking advantage of sustainable investment opportunities.   

What role do you see private capital playing in your portfolio going forward?

Private capital has and will always have a meaningful allocation in IMRF’s Portfolio.  It is simply a return generator that we cannot ignore especially with lowered return expectations moving forward. 

Investments in the most innovative companies that are technology driven and properties that take advantage of the new ways we work, play and live fuel the private markets and private capital.  The opportunity set is exciting and forward thinking and it aligns with our approach to investing sustainably for the long term.

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