According to a TRS press release, the $39.7 billion fund will seek more active management of its domestic equity investments under recommendations contained in a domestic structure study adopted April 20 by the TRS Board of Trustees. Among the portfolio shifts contemplated are trimming the large cap core allocation from 45% to 39%, which includes the reduction of the S & P 500 passive from 20.00% to just 4% and establishing a 10% allocation for a “130/30” large cap core strategy.
Other changes TRS hopes to make to its domestic equity portfolio allocation targets during the next 24 months:
- Increase the small cap growth allocation from 11.20% to 14.25%
- Step up the small cap value allocation from 8.45% to 14.25%
- Increase the small to mid cap core allocation from 1.35% to 2.5%
- Decrease the large cap growth allocation from 17% to 15%
- Lower the large cap value allocation from 17% to 15%
The plan boosts the active management target for the domestic equity portfolio from 78.6% to 93.5%.
The Board of Trustees also approved the following domestic equity manager searches:
- “130/30” large cap core
- Large cap growth
- Small/SMID value and growth
Additionally, an international study, also approved April 20 by the TRS Board of Trustees, contains the following allocation targets for the international equity portfolio that TRS hopes to reach during the next 18 months, according to a press release:
- Establish a large/mid cap core initial allocation and grow it to 11.50%
- Reduce the large/mid cap growth allocation from 37.5% to 30%
- Lower the large/mid cap value allocation from 52.5% to 30%
- Establish a small cap initial allocation and expand it to 12%
- Increase emerging markets allocation from 10% to 16.5%
The TRS Board of Trustees also approved searches for the following international equity manager searches:
- Small cap
- Emerging market
- Passive/Enhanced Index
Documents for all searches will be available on the TRS Web site ( www.trs.illinois.gov ) by May 31, 2007. Interested candidates for all searches are encouraged to contact the System's general investment consultant, R.V. Kuhns & Associates. TRS policy and the Illinois Ethics Act limit communication with TRS staff during the search process, according to a press release.
Additionally, the Board of Trustees approved a change in the way TRS searches for small capitalization managers for both the domestic and international portfolio because of unique capacity constraints in that investment strategy arena. Rather than launching individual searches on an as-needed basis, TRS will now present high quality small and mid cap managers with available capacity to the TRS Board as they are identified to the System and its investment consultant.
In other business, the TRS Board also approved a Request for Proposal (RFP) for custody/master trustee services. Northern Trust Company has served as the master trustee to TRS since 1996, and is invited to rebid, according to TRS, which has not issued RFP's for custodial services during the past decade.
TRS plans to post the RFP on its Web site by August of 2007. Finalists will be presented to the Board of Trustees in the spring of 2008.
The Teachers' Retirement System provides retirement, disability, and survivor benefits to 325,000 teachers and administrators who work for Illinois public schools located outside the city of Chicago.
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