TRS Commits $3 Billion to Investment Opportunities

SPRINGFIELD, IL – Teachers’ Retirement System in recent weeks has committed $3 billion to various investment opportunities in order to continue building the fund’s assets for its members’ retirements.

Reports to the TRS Board of Trustees indicated that the System ended calendar year 2019 with a positive 13.4 percent investment return, net of fees.

Also, assets at the end of calendar 2019 totaled more than $54.2 billion, a 10.4 percent increase over calendar year 2018, when assets totaled $49.1 billion. Total annual benefits paid during calendar 2019 were $6.89 billion. Benefit payments are expected to exceed $7 billion per year in 2020. The amount of benefits paid during calendar 2019 rose 4.2 percent over the previous year’s $6.6 billion.

In other news following the trustees’ regularly scheduled February 28 meeting:

  • The Board hired AON Hewitt Investment Consulting of Chicago to provide consulting services and a fiduciary evaluation of the System’s investment practices and policies.
     
  • TRS will issue a formal “Request for Proposals” seeking consulting services at times when the system is considering co-investment opportunities in the Private Equity portfolio. The contracts for the System’s current co-investment consultants expire at the end of the fiscal year and state law requires an RFP process. The two incumbent firms will be allowed to submit bids.
     
  • The number of TRS members participating in the state’s two “buyout” programs has exceeded original projections. Based on initial participation rates, the system projected that TRS would need $194.5 million to pay all accelerated benefit payments. But in mid-February that forecast was revised upward to at least $204 million. To accommodate the increase in accelerated payments, $15 million in unobligated funds were dedicated to the TRS programs. Through the middle of February, the participation rate for the Tier 1 “accelerated annual increase” program stood at 14.8 percent of 4,488 eligible members. The rate for the inactive member “pension buyout” stood at 7 percent of 14,599 eligible members.
     
  • Within the System’s $6.2 billion Private Equity Portfolio:
    • The commitment of $200 million to MBK Partners of Seoul, South Korea. MBK currently administers $303.4 million in TRS assets.
    • The commitment of $200 million to Greenspring Associates of Owings Mills, Maryland. Greenspring currently administers $220.4 million in TRS assets.
    • The commitment of $120 million to Parthenon Capital Partners of Boston Massachusetts. Parthenon currently administers $233.4 million in TRS assets.
    • The commitment of $100 million to Clearlake Capital Group of Los Angeles, California. Clearlake currently administers $274.3 million in TRS assets.
    • The commitment of $75 million to Bregal Sagemount of New York, New York. This is a new investment relationship for TRS.
    • The commitment of $40 million to TA Associates of Menlo Park, California. TA currently administers $90 million in TRS assets.
    • The commitment of $15 million to Ocean Sound Partners of New York, New York. This is a new investment relationship for TRS.
       
  • Within the $19.6 billion Public Equity Portfolio:
    • The commitment of a total of $799 million to three strategies in the domestic equity portfolio managed by RhumbLine Advisors of Boston, Massachusetts. RhumbLine currently administers $6.2 billion in TRS assets.
    • The commitment of $500 million to Northern Trust Global Investments of Chicago, within the International Equity Portfolio. Northern Trust currently administers $2.5 billion in TRS assets.
    • The termination of the $217 million small capitalization strategy in the Domestic Equity Portfolio of AQR Capital Management of Greenwich, Connecticut.
    • The termination of the $711 million large capitalization strategy in the International Equity Portfolio of Boston Company Asset Management of Boston, Massachusetts.
    • The termination of the $101 million small capitalization strategy in the Domestic Equity Portfolio of RhumbLine Advisors of Boston Massachusetts. RhumbLine continues to administer $6.2 billion in TRS assets.
    • The termination of the $66 million large capitalization strategy in the International Equity Portfolio of Brown Capital Management of Boston, Massachusetts.
    • The termination of the $384 million large capitalization strategy in the International Equity Portfolio of J.P. Morgan Asset Management of New York, New York. J. P. Morgan continues to administer $616.1 million in TRS assets.
    • The termination of the $570 million large capitalization strategy in the International Equity Portfolio of Mondrian Investment Partners of London, United Kingdom.
       
  • Within the $14.7 billion Global Income Portfolio:
    • The commitment of $350 million to Cerberus Capital Management of New York, New York.
    • The commitment of $200 million to LCM Capital Management of London, United Kingdom. LCM currently administers $108.2 million in TRS assets.
    • The termination of the $455 million U.S. TIPS strategy of the Pacific Investment Management Company of Newport Beach, California. PIMCO continues to administer $2.8 billion in TRS assets.
       
  • Within the $8.1 billion Real Assets Portfolio:
    • The commitment of $150 million to Oak Street Real Estate Capital of Chicago. Oak Street currently administers $117 million in TRS assets
    • The termination of the $270 million real return strategy of AQR Capital Management of Greenwich, Connecticut.
       
  • Within the $5.6 billion Diversifying Strategies Portfolio:
    • The commitment of $150 million to Aspect Capital of London, United Kingdom. This is a new investment relationship for TRS.
    • An additional commitment of $75 million to the existing mandate of Kirkoswald Asset Management of New York, New York. Kirkoswald currently administers $327.3 million in TRS assets.
    • An additional commitment of $50 million to the existing mandate of Trend Capital Management of Boca Raton, Florida. Trend currently administers $271.9 million in TRS assets.
    • An additional commitment of $25 million to the existing mandate of Light Sky Macro of New York, New York. Light Sky currently administers $238.2 million in TRS assets.
    • The partial redemption of $75 million from a multi-strategy fund managed by AQR Capital Management of Greenwich, Connecticut. AQR continues to administer $549.8 million in TRS assets.
    • The partial redemption of $50 million from the core macro strategy managed by Cantab Asset Management of Cambridge, United Kingdom. Cantab continues to administer $226.5 million in TRS assets.
    • The partial redemption of $12 million from PDT Mosaic of New York, New York. PDT continues to administer $255.5 million in TRS assets.

About Teachers’ Retirement System

The Teachers’ Retirement System of the State of Illinois is the 37th largest pension system in the United States, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The System serves 434,313 members and had assets of $54.2 billion as of December 31, 2019.