Illinois Teachers Plan Sets out New Allocation Blueprint

April 8, 2011 (PLANSPONSOR.com) – The Illinois Teachers’ Retirement System (TRS) Board of Trustees approved a revised asset allocation plan for the system’s $34.6-billion portfolio.

A news release said the change reflects predicted market trends and continues a “steady and deliberate” diversification of TRS investments toward opportunities that will enhance long-range returns.

The allocation plan was developed over the last several months by TRS investment staff and the system’s investment consultant, R. V. Kuhns & Associates of Portland, Oregon. The plan is the product of an analysis of historical trends in each asset class and the status of the international economy. The system’s current asset allocation plan was approved by the board in 2006.

“These asset allocation goals reflect our overall strategy of a steady, deliberate evolution of allocating TRS assets into areas that will enhance the portfolio and strengthen the future for our members,” said TRS Chief Investment Officer Stan Rupnik, in the news release. “Our goal is to diversify the portfolio, minimize risk as much as possible and invest assets to maximize returns.”

Under the revised plan, which takes effect with the state’s new fiscal year on July 1:

  • Domestic Equity – The allocation will be set at 20% of total assets, down from the current Target of 26%. As of December 31, 2010, this asset class held $9.96 billion of TRS assets.
  • International Equity – The allocation is held at the existing target of 20%. As of December 31, 2010, this asset class held $7.2 billion of TRS assets.
  • Fixed Income – Assets allocated to this portfolio will rise from the current 15% target to 16 %. As of December 31, 2010, this asset class held $5.3 billion of TRS assets.
  • Real Estate – Investment assets allocated will remain at the current target level of 14%. As of December 31, 2010, this asset class held $3.5 billion of TRS assets.
  • Absolute Return – The asset allocation for this portfolio will rise from 5% to 8%. As of December 31, 2010, this asset class held $1.3 billion of TRS assets.
  • Private Equity – Assets allocated to this portfolio will rise from the current 10% target to 12 %. As of December 31, 2010, this asset class held $3.2 billion of TRS assets.
  • Real Return – Asset allocation for this portfolio will remain at 10% of total assets. As of December 31, 2010, this asset class held $3.5 billion of TRS assets.

The Teachers’ Retirement System of the State of Illinois is the 86th largest pension system in the world, and provides retirement, disability and survivor benefits to teachers, administrators and other public school personnel employed outside of Chicago. The system serves 372,000 members and had assets of $34.6 billion as of December 31, 2010.

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