Illinois to seek opportunistic managers

The state’s university pension plan will be launching a search next month for real estate firms to manage a new portfolio of opportunistic investments.

The State Universities Retirement System (SURS) of Illinois, which manages a $13.4 billion defined benefit plan, plans to issue a request for proposals in early to mid-October for opportunistic real estate managers to oversee $150 million in new investments, via either a direct fund or fund of funds structure.

SURS, based in Chicago, is looking to hire one or more managers for the investments, which will be in addition to the state’s current investment programme. The pension had committed $957 million to real estate investments as of 30 June, of which $371 million was in direct real estate funds, $364 million in US real estate investment trusts and $222 million in non-US REITs.

SURS’ current commitment to opportunistic real estate is $115 million, including a $40 million commitment to Dune Real Estate Parallel Fund II in 2008 and a $75 million commitment to the Franklin Templeton Emerging Manager Real Estate Fund of Funds in 2010. Both funds currently are in their investment period, according to Daniel Allen, chief investment officer at SURS.

The state’s commitment to opportunistic real estate funds currently represents 24.5 percent of its direct real estate allocation, Allen said. Core accounts form the vast majority – 73.6 percent – of SURS’ direct allocation, while value-added strategies make up just 1.9 percent, he noted. Despite the planned addition, the pension has not set a specific allocation target for its opportunistic strategies.

The planned search for opportunistic managers comes in the wake of a June decision by SURS to raise its total real estate allocation target to 10 percent from its existing 7 percent, Allen noted.