US - The Teachers' Retirement System of the State of Illinois (TRS) has revamped its investment strategy resulting in contract awards and managerial searches.
The overhaul means the US$ 41.8bn organisation is eliminating core investment strategies in its fixed income portfolio as part of the recommendations contained in a fixed income structure study adopted by the board of trustees.
As part of the shake-up, the board dropped Blackrock due to performance reasons, and to further efforts to reach the asset allocation goal for fixed income, which was reduced in 2006 from 23% to 15% of the total investment portfolio.
Blackrock managed a $1.4bn core plus fixed income mandate for TRS, as at 31 May 2007.
TRS said it would also create exposure to long duration bonds and international fixed income, which are designed to provide better risk-adjusted returns and additional diversification benefits.
Meanwhile, the board has hired State Street Global Advisors, Quantitative Management Associates, Trilogy Global Advisors and Wellington Management Company to run four mandates.
As an example, Wellington Management Company will manage a $500m global tactical asset allocation mandate within the real return asset class. The new mandates will be funded through the overall rebalance of the international equities and fixed income portfolios.
TRS also authorised searches for a commodity manager or managers within the real return asset class, a long duration bond manager and an international fixed income manager.
Regarding performance-related issues, trustees voted to retain PIMCO StocksPlus on the TRS watch list for performance reasons. PIMCO manages $1.1bn in US equity enhanced index for TRS.
Despite this, the board approved the removal of Mazama Capital Management and LSV Asset Management from the TRS watch list.
From an actuarial perspective, the TRS board of trustees adopted changes in the actuarial assumptions used by TRS to estimate the accrued liability of the system.
Explaining the decision, the retirement body said:"An experience analysis that compares the previous assumptions with the actual experience over the past five years shows that the previous assumptions underestimated retirement rates and the use of sick leave applied to service credit and overestimated mortality rates.”
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