State Street, Prudential Win Illinois TRS Business

December 5, 2008 ( - The Illinois Teachers' Retirement System (TRS) Board of Trustees selected State Street Corporation to serve as the System's new master trustee/custodian and securities lending provider, subject to contract execution.

The position requires the safeguarding of System assets, calculating and reporting investment performance, cash management, and multi-currency accounting, according to a TRS announcement. State Street replaces Northern Trust Company, which had served TRS as master custodian since 1996.

The Board terminated Neuberger Investment Management (formerly Lehman Brothers Asset Management) due to performance and for organizational concerns regarding the recent sale of the firm’s asset management division to Neuberger, the announcement said (See  Management Prevails in Neuberger Berman Bid ). The firm managed $903 million in fixed income, enhanced index assets for TRS.

An enhanced index mandate within the fixed income portfolio was awarded to Prudential Fixed Income Management, with the source of funding for the commitment (approximately $700 million) coming from the termination of Neuberger Investment Management.

Even as the TRS Board of Trustees authorized TRS staff and the System’s consultants to conduct a new asset allocation study, it also performed the following actions:

  • Increased the mandate held by K2 Advisors, an absolute return fund of fund manager that currently manages $236 million for TRS, by $100 million;
  • Hired Bridgewater Associates to directly manage a $179 million absolute return mandate;
  • Awarded $15 million to StarVest Partners II, a technology-focused, woman-owned venture capital fund, as part of the TRS Emerging Manager Program; and
  • Approved a $50 million commitment to Onex Partners III, L.P., a private equity buyout fund.

The announcement said TRS performs thorough reviews of its investment strategies every three years.