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Illinois Teachers commits $350m to real estate

The $42.75 billion pension plan’s investments with three separate account managers make up more than half of its allocation to the asset class for 2014.

The Teachers’ Retirement System (TRS) of the State of Illinois has earmarked $350 million to three existing real estate separate account managers. The new investments are part of a long-term goal to increase the pension plan’s real estate allocation to 14 percent of its total portfolio from its current allocation of 11.7 percent, or $5.1 billion.

Of the $350 million, Illinois Teachers designated an additional $125 million to Chicago-based Capri Capital Partners, $125 million to Dallas-based Invesco Real Estate and $100 million to Chicago’s Heitman. Capri, which has served as a manager for the pension plan since December 1991, currently manages $1 billion for the institution, primarily through a separate account but also through such funds as Capri Capital Advisors Apartment Fund III and Capri Select Income Fund II. Meanwhile, Invesco, a separate account manager since July 2008, already oversees $456.6 million in assets on behalf of TRS and Heitman, which formed a separate account with Illinois Teachers in July 2009, manages $1 billion.

The new commitments are part of Illinois Teachers’ fiscal year 2014 tactical investment plan, which was approved in August and called for approximately $600 million in new property investments during the current fiscal year, which began on July 1. The pension plan now has fully committed its $600 million allocation, having previously designated $150 million to Lone Star Funds’ Lone Star Real Estate Fund III in October and $100 million to The Blackstone Group’s Blackstone Real Estate Partners Asia in December.

“Investment in real estate is intended to increase the TRS total portfolio long-term rate of return and reduce year-to-year volatility,” the pension plan wrote in its fiscal year 2013 annual report. “The real estate asset class offers competitive returns, provides diversification benefits to portfolio of stocks and bonds and also serves as a hedge against inflation. Additionally, real estate offers a strong income component to pay TRS benefits.”