Illinois Teachers allocates $850m to RE

Of that amount, the $45.3 billion pension plan expects to commit $550 million to commingled funds as part of its new fiscal year 2015 tactical investment plan for the asset class.


The Teachers’ Retirement System of the State of Illinois has earmarked up to $850 million to real estate for fiscal year 2015, which began on July 1. “The key point of the fiscal year 2015 real estate tactical investment plan centers on increasing the size of the real estate portfolio over time to the system’s long-term target of 15 percent of the total portfolio,” a spokesman wrote in an email to PERE.  The pension approved the plan at its board meeting this week.

At its board meeting in June, Illinois Teachers increased its allocation target to the asset class to 15 percent, up from its fiscal year 2011 target of 14 percent.  Currently, the pension plan is underweight in real estate, which accounts for 12.4 percent, or $5.6 billion, of its overall portfolio.

As part of the new $850 million allocation, Illinois Teachers approved an additional $300 million investment with Invesco Real Estate.  This latest commitment follows a $125 million pledge that Illinois Teachers made to the Dallas-based real estate manager at its February meeting this year, as part of a $350 million allocation to three existing separate account managers. The strategy for the new capital outlay, similar to that of the $125 million commitment six months ago, will focus on core and value-added investments and will be diversified by geography and property type. Invesco, which first established a separate account with Illinois Teachers in July 2008, now administers $671 million of the pension plan’s assets.

The $300 million commitment will account for its entire separate account allocation in the new fiscal year. The remainder of the capital, $550 million, will be committed to commingled funds. Similar to previous years, the new tactical investment plan will pursue a diversified strategy that will target core, value-added and opportunistic investments in the US, Europe and Asia and cover all property types.

Illinois Teachers’ new real estate allocation represents a significant jump from its fiscal year 2014 allocation of $600 million, which itself was a significant increase from the prior fiscal year allocation of $400 million. The pension plan’s actual capital output during fiscal year 2014, however, was $875 million, far exceeding its target allocation for the 12-month period. In addition to the $350 million allocation in February, other real estate commitments during the past fiscal year included $300 million to Starwood Capital Group and $100 million to The Carlyle Group, both in May; $100 million to The Blackstone Group in December; and $150 million to Lone Star Funds in October.