UNITED STATES - Teacher Retirement System for the State of Illinois is looking at making several changes to its real estate strategy as part of its five-year plan for real estate.

According to pension fund officials, one of the ideas discussed at its 30 October board meeting was a possible alteration to the overall makeup of the real estate portfolio.

At present, the pension fund body's real estate investment plan requires the portfolio be split so 60% is held in core investments and 40% is in specialist real estate.

However, the change being considered would increase the allocation to specialist sectors and reduce the amount invested in core real estate.

This would lead to the possibility of higher returns and additional diversification in the overall portfolio, according to officials.

Illinois Teachers believes this could be accomplished either by allocating capital to a separate account relationship or through commitments to commingled funds.

Creating a range allocation for real estate is another idea being kicked around as the pension fund currently has a 14% targeted allocation to real estate but has no ranges within which it could invest in real estate as an assets class.

Many pension funds in the United States have ranges for investing in real estate that could put it 2% to 4% either side of targeted allocation to asset classes.

According to Illinois Teachers officials, such a move would create some flexibility within the real estate portfolio and allow it to tap investment opportunities which might put it above its targeted asset allocation.

The pension fund is also looking at creating more specific targets for investing in US regions as it has ranges of 10-40% when investing in the West, Midwest, South and East regions.

It would like to create a specific percentage for each region, as the National Council of Real Estate Investment Fiduciaries has done with its index.

Illinois Teachers' investment staff and its consultant, Callan Associates, will be working on these ideas for  its five-year strategic plan over the coming months before presenting recommendations to the pension fund board in February 2009.