Illinois Teachers’ to explore private equity secondary sales, co-investments

Teachers’ Retirement System of Illinois is planning to explore secondary sales, increased co-investments and a focus on Asia in its private equity portfolio next year.

The $51.3 billion system discussed its 2019 PE tactical plan at its Aug. 17 meeting, previewing potential changes to a more than $6.3 billion portfolio.

The tactical plan touches on several initiatives for the fiscal year ending June 2019, including an updated target for corporate finance investments, a review of the system’s Asia strategy, expanded co-investments and opportunistic secondary sales, a summary provided by spokesman Dave Urbanek shows.

The plan would tweak the system’s target ranges for PE subsectors by increasing the target range for corporate finance — analogous to buyouts — to 65 to 85 percent from 60 to 80 percent.

That new target better reflects the system’s actual 82.6 percent allocation to corporate-finance investments. The subsector targets for venture capital and special situations will remain unchanged, at 0 to 20 percent and 5 to 25 percent, respectively.

Illinois Teachers is also interested in increasing co-investments as it attempts to reach its 15 percent allocation overall PE target.

“Fund investments should remain the core of the private equity portfolio given the current resources available to the program, but peripheral strategies such as co-investments and portfolio rebalancing should help to enhance returns and provide greater control over exposures and risk,” the plan summary said.

The retirement system also plans to pursue secondary sales in the coming fiscal year.

“Market dynamics continue to be favorable for sellers of assets, offering TRS an opportunity to reshape its portfolio as desired, shed non-core managers, and pursue liquidity for the asset class,” the plan summary said.

TRS plans to review its strategy for investing in Asian private markets, but it declined to provide details. TRS currently relies on a fund-of-funds manager in the region, and it will “reevaluate the relationship and its overall strategy within Asia to provide a clear path for future investments,” according to the plan summary.

Urbanek declined to provide the name of the fund-of-funds manager and did not say how much TRS had invested with the fund of funds.

TRS also disclosed commitments of $75 million to SK Capital Partners and $50 million to Inflexion Private Equity Partners at its Aug. 17 board meeting.

TRS is below its 15 percent target, with a total exposure to private equity of 13.6 percent as of December 2017.

Action Item: Read more about Illinois Teachers’ here: https://www.trsil.org/