Illinois Municipal seeks non-core real estate manager

The $26.1 billion pension has at least $100 million to allocate to non-core real estate funds and plans to hire an opportunistic manager as it aims to increase its allocation in the asset class.

The Illinois Municipal Retirement Fund is soliciting proposals from real estate investment management firms to oversee investments in multiple non-core commingled real estate funds. The size of the mandate – likely to be funded with cash or index investments – has yet to be determined, although Illinois Municipal stated in a request for proposals (RFP) issued this month that it had at least $100 million to allocate to non-core real estate.

The goal of the RFP is to increase Illinois Municipal’s current real estate allocation of 2.8 percent to its target allocation of 6 percent, a spokesman said in an email to PERE. As of 30 June, the Oak Brook, Illinois-based pension plan’s non-core real estate portfolio comprised 10 mandates with a total value of $255 million and $185 million in unfunded commitments, while its total portfolio was valued at $26.1 billion.

The winning investment manager or managers would invest the mandate through a closed-end non-core commingled real estate fund, with the objective of delivering returns in the top quartile of managers with similar strategies, according to the RFP. The manager would make recommendations on the allocation of assets among real estate investments, as well as specific opportunities relating to the acquisition, retention or disposition of investments.

Managers would be required to have a non-core commingled fund in the market; agree to act as a fiduciary with respect to the non-core fund; and be registered as an investment adviser or a bank under the Investment Advisers Act of 1940, among other qualifications. Respondents will be evaluated and ranked on four primary factors: people, investment strategy, performance and pricing.

The RFP directs all inquiries and communications to Illinois Municipal’s investment consultant, Callan Associates. Proposals must be received by 2 August, and finalists are expected to present to Illinois Municipal’s investment committee on 25 October. The board is due to vote on the committee’s recommendation of a real estate investment manager or managers on 26 October.