UNITED STATES - Teachers Retirement System of the State of Illinois is planning a shift in its separate accounts real estate programme when it makes its next manager search.

Until now, Teachers has operated separate accounts for each individual property type, such as the Lincoln Property Company for industrial properties, but its next move will be to cover the four main property types of core holdings.

The exact amount of capital to be allocated has yet to be determined but the pension fund thinks the additional separate account manager will enable it to further diversify its office and industrial properties, particularly in its core holdings - office, industrial, retail and apartments.

Illinois Teachers has a core return hurdle rate of 5% unlevered, plus 2% for levered and the new separate account will be discretionary account within a box, leaving the hired manager to close acquisitions on its own.

At its October board meetings, the fund's officials also committed $200m (€136.2m) into three commingled funds.

Two of the commingled funds Illinois Teachers committed to invest in hotels, having approved commitments of $50m each to the Cornerstone Hotel Income and Equity Fund II and RLJ Lodging Fund III.

The pension fund has been a long-term player in the hotel market as Stone Levy manages a separate account hotel portfolio currently valued at $224m.

The pension fund believes hotels can be a good addition to a portfolio as it has generated positive returns and diversification for its overall real estate assets.

Illinois Teachers has also made a $100m commitment to Walton Street Real Estate Fund VI to contribute to a targeted allocation for real estate of 14%. The amount invested at this point is 11.3%.

Total plan assets for the pension fund are $41.9bn, with real estate assets of $4.73bn to June 30, 2007.

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