Illinois Teachers nearly doubles mandates with Starwood Capital
The Teachers’ Retirement System of the State of Illinois has almost doubled the size of its relationship with Starwood Capital.
The US pension fund made a new commitment into Starwood’s current fund that will near double the amount of the capital that the firm manages for the pension fund.
The new commitment of $300m (€268.7m) has been made into the Starwood Global Opportunity Fund XI.
Starwood manages a current portfolio for the pension fund valued at $383.9m, as of June.
Starwood is seeking a $6bn capital raise for Fund XI. The real estate manager is planning to co-invest 1% of total fund commitments.
Fund XI will be looking to invest in both North America and Europe, including the UK where investment opportunities could emerge from Brexit.
The new fund has targeted returns of a 14% to 16% net IRR. The opportunity fund invests in all major property types.
The pension fund placed a total $6.9bn value on its global real estate portfolio, as of June.
Illinois Teachers has decided to lower its long-range assumed rate of investment from 7.5% to 7%.
Dick Ingram, the pension fund’s executive director, said, “This is a prudent move for TRS in light of the conditions that we see in the economy.
“We will continue to study expected returns as part of our asset allocation review during the coming year.”
This is the third time in the last four years that Illinois Teachers has reduced its assumed rate of return in order to keep the pension fund in line economic reality. In 2012, the pension fund lowered its assumed rate from 8.5% to 8%. It was cut to 7.5% in 2014.
“Along with our actuaries and investment consultants, we have methodically collected and analyzed all of the most economic projections and forecasts,” Ingram said.
He added: “The consensus is that returns in the foreseeable future will be lower than what we have seen in the previous few years.”