Illinois to commit up to $1.2bn to private equity

The state teachers’ pension is trying to reach its long-term goal of a 10% private equity allocation.

The $30 billion Teachers’ Retirement System of Illinois will spend more on private equity this year than last, having agreed to commit between $700 million and $1.2 billion to the asset class for fiscal 2010.

The measure is meant to help it reach its long term allocation goal of 10 percent. As of 30 June, the pension had an actual allocation to private equity of 7.8 percent.

The range approved for fiscal year 2010, which began on 1 July, has the pension moving back towards private equity investment levels of fiscal 2008, in which it committed $1.4 billion to the asset class. In fiscal 2009, Illinois TRS committed a total of $625 million.

Illinois TRS has not yet made any investments with private equity firms this fiscal year.

For new commitments, Illinois TRS will “take advantage of market conditions” that have given limited partners in private equity funds more power to negotiate friendly terms and conditions, like lower fees, a pension spokesperson said.

The pension has exposure ranges to subsectors within the private equity asset class, including 60 percent to 80 percent for buyouts, 10 percent to 20 percent for venture capital and 5 percent to 20 percent for special situations, including distressed and mezzanine debt.

Illinois TRS bumped up its allocation to private equity from 8 percent to 10 percent in May. Its last commitment to private equity was a $100 million follow-on commitment to the Blackstone Group’s sixth fund, which is targeting $15 billion and had collected at least $8 billion as of February. The pension had already committed $50 million to the fund last October, but decided to up its investment after the board increased the private equity allocation.

In July, Illinois TRS hired Zachary Doehla as the private equity investment advisor, replacing Lamar Villere, who left the pension in February to join the Tennessee Consolidated Retirement System.