UNITED STATES - The Teachers' Retirement System of the State of Illinois is planning to create an emerging manager programme as part of its future real estate investment programme.

The additional sector will be part of a re-evaluation of the pension fund's five-year real estate investment strategy, which is being looked at over the next several months.

Investment staff at Illinois Teachers' and the pension fund's consultant, Callan Associates, led by Jamie Shen, senior vice president, will work together to produce recommendations to be presented to the board at the February 2009 meeting.

The pension fund is hoping to form a relationship with an emerging manager and then grow this relationship over the long term, though the emerging manager program in real estate will only be accessible through commingled funds.

The pension fund body has established some definitions as to what makes an emerging manager, including a requirement stating the manager must have created fewer than three commingled funds backed by institutional capital.

The last time the pension fund created a five-year real estate strategy was in 2002 when of 90% of its real estate portfolio investments were held in separate accounts and just 10% in commingled funds.  Today, the breakdown is 70% in separate accounts and 30% in commingled funds.

The fund's long-range plan is likely to focus more capital into commingled funds and less in separate accounts but Illinois Teachers still has a way to go before its reaches its targeted asset allocation of 14% in real estate.

By the end of May, the fund had invested $4.7bn (€3.2bn) in real estate, amounting to 12% of the pension funds total plan assets.

The current investment plan calls for 60% core and 40% in specialty assets, and is allocated across the office, industrial, retail, apartments and hotels sectors.