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Illinois Teachers invests with Principal

The $39.6 billion pension system’s $200 million allocation marks its first investment with the Des Moines, Iowa-based institutional real estate manager.

The Teachers’ Retirement System of Illinois has hired Principal Real Estate Investors as its first industrial real estate separate account manager. 

Under the mandate, Principal will oversee approximately $200 million in new industrial investments. The firm was selected from a number of candidates that responded to a request for proposals approved by the Illinois Teachers board in August 2012. 

The separate account, which will focus on the acquisition of core industrial properties across the US, represents Illinois Teachers’ first investment with Principal. The firm will not have full discretion under the mandate and is not making a co-investment in the separate account.

The new separate account will help Illinois Teachers to reach its long-term target allocation of 14.3 percent for industrial holdings within its $4.6 billion real estate portfolio. Industrial assets currently account for 7.75 percent of its property portfolio.

Illinois Teachers, which began investing in real estate in 1983, currently holds 11.7 percent of its total portfolio in the asset class, with a long-term allocation target of 14 percent. The pension plan invests in both core and so-called specialty strategies, both directly and through commingled funds, and has amassed a real estate portfolio comprising office, industrial, retail, multifamily and hotel assets. The pension plan also has targeted up to 20 percent of its property holdings for international strategies. 

Principal Real Estate Investors is the real estate group of Principal Global Investors, which itself is the asset management arm of financial services conglomerate Principal Financial Group.