Chicago Teachers reviews 'emerging managers' status

UNITED STATES- Public School Teachers' Pension and Retirement Fund of Chicago is looking at investing $125m (€84.3m) this year, in international real estate and emerging managers, once the scheme has reviewed its definition of an ‘emerging manager'.

The pension fund is thought to be considering a $85m placement into commingled funds with an international strategy along with a further $40m in commingled funds run by emerging managers.

Chicago Teachers has so far invested 3% of its real estate in the international market but the long-term goal is to reach 15% by investing in a mixture of commingled funds with an international strategy, including investments in Europe and Asia.

But state law in Illinois currently means the pension fund defines emerging managers as those firms than have total assets under management at $500m or less.

And Chicago Teachers has not decided if it will continue to go with this definition or come up with a new one on its own so the pension fund is expected to make a decision on this over the next couple of months.

The pension fund will be working on these strategies over the next several months, with the assistance of Rob Kochis, principal at real estate consultant, The Townsend Group.

"It's our opinion that the strategies being discussed will benefit the pension fund's portfolio by achieving strong investment returns and produce additional diversification for its entire portfolio."

The last real estate move made by Chicago Teachers was fully finalized at the end of last year when the pension fund changed the investment mandate of Morgan Stanley from a domestic REIT strategy to a global one. MS now oversees a REIT portfolio for the fund worth $111m to the end of September of 2007.

The pension fund still has two other REIT managers providing a domestic strategy totaling $139m of assets under management - Urdang Securities Management and Adelante Capital Management each manage 50%.

Chicago Teachers has total plan assets of $11bn while its real estate portfolio is $1.1bn, or 10% of the fund.