Illinois TRS hikes PE allocation to 14 pct from 12 pct

  • Cuts targets for domestic, international equities
  • Assumed rate of return drops to 7.5 percent
  • Fresh commitments to Sofinnova, Veritas 

TRS Illinois made room for the increase by lowering its allocations to domestic and international equities by a total of four percentage points. Allocations to its real estate and real return portfolios grew by one percentage point each, to 15 percent and 11 percent, respectively.

“TRS has said for a number of years that we’re (gradually increasing) the amount of assets dedicated to alternatives,” retirement system spokesman Dave Urbanek told Buyouts, noting that TRS Illinois increased its private equity allocation target from 10 percent to 12 percent in 2011. “The flip side of that is that the bulk of our assets are in equities and bonds.”

Equities and fixed income assets combined accounted for 60.5 percent of the retirement system’s $43.6 billion investment portfolio as of March 31, according to its website. TRS Illinois’s allocation to private equity and real estate stood at 10.5 percent and 12.5 percent as of the same date.

The new allocation mix is designed “to minimize investment risk and maximize returns” in light of TRS Illinois’s decision to reduce its assumed rate of return from 8 to 7.5 percent. The reduction was prompted by a recent review of the retirement system’s asset liability model. TRS Illinois reviews its assumed rate of return every three years.

In addition to disclosing a new asset allocation mix, TRS Illinois also announced re-up commitments to mid-market private equity firm Veritas Capital and Sofinnova Ventures.

The retirement system committed $100 million to Veritas’s Fund V, Urbanek said. TRS Illinois invested $75 million in Fund IV, a $1.3 billion, 2010-vintage fund, which was generating a 1.5x multiple and 17.5 percent IRR as of December 31, according to data made available by Bison.

TRS Illinois committed up to $50 million to Sofinnova Venture Partners IX, having committed $40 million to the firm’s previous fund in 2011. That fund had generated a 1.07x multiple and 9.8 percent IRR as of December 31, according to Bison.