US - State Street and Northern Trust have lost US$900m in funds managed on behalf of the Teachers' Retirement System of the State of Illinois (TRS) on the back of the fund's decision to transfer the combined US$1.8bn managed by the firms in equity index accounts funds to enhanced index products.
At its May meeting in Springfield, the Board of trustees decided to hire Barclays Global Investments and T. Rowe Price to manage US$900m each in S&P 500 stocks-based enhanced index products. Funds will come from equity index mandates managed by SSgA and Northern Trust Investments.
TRS put Northern Trust on its watch list after three senior staff members departed the firm. Jim Creighton, CIO of quantitative business, Patrick Canon, head of domestic desk for quantitative and Peter Kuntz, head of the international desk for quantitative business, all departed at the end of July last year.
Callan Associates advised the fund on its strategy change. No one from the fund was available for further comment before deadline.
The fund’s Board also approved a change in the international equity structure, which calls for active management of about US$670m presently invested passively in a SSgA Optimised EAFE Index. As a result, TRS plans to search for up to two firms to manage an active international equity growth mandate.
TRS flagged the development of an emerging manager programme, which the fund will gradually build to a US$500m target through a structured internal programme to identify promising developed public market managers.
“TRS staff does not expect to reach the emerging manager target during the coming fiscal year because of the required due diligence activities,” the fund said.
In addition, the Board adopted a financial year 2006 private equity tactical plan, calling for commitments of about US$600m, depending on market conditions. The estimated allocation of the likely commitments is US$225,000 to venture capital, US$300,000 to buyouts, US$50,000 to special situations, US$25,000 to subordinated debt.
The fund’s current asset allocation stands at 43% domestic equity, 15% international equity, 25% fixed income, 12% real estate, 4% private equity and 1% short term.
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