Illinois Enters Hedge Funds Through Side Doors

The $39 billion Teacher’s Retirement System of Illinois is making its first foray into the hedge fund space via multi-strategy funds of funds, and anticipates approving one or more finalists during its meetings in May, according to spokeswoman Eva Goltermann.

“We’re looking for a manager that can provide a full range of hedge [fund] products,” said Goltermann. “Other searches this year are to be determined because the board has indicated that it’s going to take up to three years to fully fund this allocation target, which is 2.5% of the total portfolio.”

Goltermann added that, “based on our model, our annual hedge fund return assumption is about 8.25% with a risk assumption of 7%, which is actually lower than some of the traditional equities.” 

According to executive director Jon Bauman, Illinois’ consultant, RV Kuhns¸ recently completed an asset allocation study whereby it was determined that the system could increase its overall expected annual return by 39 basis points and decrease its risks by 22 basis points by adding absolute and real return strategies to its portfolio and cutting its investments in U.S. stocks and bonds.