The State Universities Retirement Systems of Illinois (SURS) said it expects agriculture will make up less than 10 percent of its total real assets portfolio, after the pension’s consultants recommended it enter the asset class for the first time.
“It is possible that ag would be part of the SURS real assets portfolio,” said SURS communications manager Beth Spencer in an email to Agri Investor. “If included, we would expect it to be a minor (10 percent or less) portion of the overall real asset portfolio.”
The $20.1 billion SURS currently has no agriculture investments within its £1.3bn real asset portfolio, which includes real estate and infrastructure investments, according to a review prepared by consultancy Callan and provided to Agri Investor.
In the review, Callan recommends SURS deploy $225 million this year within “the non-traditional growth” portion of its real assets portfolio. International real estate, infrastructure and agriculture are among the asset classes Callan said would be suitable for such commitments, which it suggests should vary between $50 million and $100 million.
“Focus on investments that will provide additional layers of diversification or risk mitigation to the portfolio,” wrote Callan vice president Sarah Gal and her co-authors. “Employ a flexible approach to capital allocation depending on relative opportunities in real assets.”
The allocation to “non-traditional growth” that could include commitments to ag funds is designed to constitute 4 percent of the broader SURS portfolio. It differs from the “core” allocation designed to provide stabilized growth that makes up 6 percent of total plan assets, largely through domestic real estate investments.
Callan’s report also includes details of SURS’ plans to devote 20 percent of all new capital deployed over the next five years to firms managed by minorities, females and persons with disabilities (MFDB).
“In real assets, core funds tend to be sponsored by very large organizations which are not MFDB,” wrote Gal and co-authors. “Most MFDB firms sponsor non-core funds. As such, most MFDB exposure is anticipated to be added within the SURS non-traditional growth – non-core real assets portfolio.”
An overview of MFDB-managed firms that have submitted information via SURS procurement in the Callan report, identifies Homestead Capital as the only agriculture-focused investment manager that could benefit from the 20 percent MFDB allocation. The firm is identified in the report as being managed by a person of Hispanic heritage and as having assets under management of $980.5 million.