The Teachers’ Retirement System (TRS) of the State of Illinois plans to begin making co-investments in real estate as part of an expansion of an existing programme that the system established within its private equity asset class in 2010.
“The system’s existing relationships within its private equity and real estate portfolios will at times provide for compelling co-investment opportunities,” a spokesman told PERE via email. “Establishing a process to participate in such offerings is important to the overall success of the TRS investment programme.”
To this end, Illinois Teachers has issued a request for proposals (RFP) for a consulting firm to advise the system on the implementation and periodic reassessment of a real estate co-investment programme, including investment goals and objectives, as well as evaluate potential co-investment opportunities.
According to the RFP, the consulting firm is required to have a minimum of three years’ experience advising public or private pension funds on real estate co-investments, or other relevant experience. The firm also must have a client base that has, in aggregate, real estate assets under management or commitments of at least $1 billion, and agree to provide consulting services on a non-discretionary, fee-only basis.
Illinois Teachers has set a deadline of August 16 to receive RFP responses and intends to make a final selection in late October. The pension system approved the search in March.
The pension plan has not yet determined how much capital it will allocate to real estate co-investments. The private equity co-investment programme has invested a total of $237 million to date.
Illinois Teachers’ current real estate portfolio includes nearly $4.4 billion in direct and commingled fund investments in the office, retail, industrial, apartment and hotel sectors throughout the US and abroad. The pension system, whose real estate holdings currently account for 11.8 percent of its total AUM, has a long-term real estate allocation target of 14 percent.
US pension funds and other institutional investors increasingly have favoured co-investments as a means of allocating capital to real estate, since such arrangements offer greater control over how capital is spent and typically involve no or reduced management fees.