Illinois TRS seeks advisor

The Teachers’ Retirement System of Illinois is searching for an advisor to help reach a recently raised 8% target allocation to private equity.

The board last month voted to raise the allocation from the 6% level set in 2005. The pension fund had about $1.5 billion, or 4.0% of its $37.4 billion in assets invested in private equity, as of Sept. 30. Just over half of that represented buyout deals (51%), and the balance is in venture capital (32%), subordinated debt (6%), distressed debt (6%) and special situations (5%).

The board still employs turnover-plagued Pacific Corporate Group (PCG), which had been on the job since May. Stan Rupnik, spokesman for the pension fund, says that the request for proposal was issued to make certain PCG is “still the best fit for our program given their organizational changes.”

“The returns in recent years have just been outstanding,” says Eva Goltermann, a spokeswoman for TRS Illinois, which has been investing in private equity since 1983. “Private equity has been one of our top-performing asset classes, providing diversification to the overall investment portfolio.”

The private equity portfolio returned 27.72% during the one-year period ended Sept. 30, according to TRS Illinois.

In May, TRS Illinois hired La Jolla, Calif.-based PCG as its first consultant specializing solely in private equity. The pension group had previously received advice on the program from RV Kuhns and Associates, its general investment consultant. PCG consultant Tom Keck, according to Goltermann, helped bring TRS Illinois $150 million worth of private equity commitments. In December the board approved a $50 million commitment to J.C. Flowers II, a buyout fund focused on financial services. The fund is managed by J.C. Flowers & Co. in New York. The pension fund also agreed to a $100 million commitment to fund VI of Providence Equity Partners, a buyout firm focused on media and telecommunications.

Keck, whom TRS Illinois considered to be its lead consultant at PCG, left in December. He was the second lead consultant to leave PCG in just under three months, says Goltermann. —Erick Bergquist