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TRS Illinois allocates $480m to real assets amid ‘economic downturn’

Senior investment offer for real estate Tim Hayes says the $53.4bn pension will seek balance across risk and sectors in building out its 'other real assets' portfolio.

The Teachers’ Retirement System of Illinois has set aside $480 million for real assets including infrastructure, agriculture and timber in 2021 as part of its response to the “significant economic downturn.”

“Given the current pandemic environment, the real asset portfolio objectives of diversification, steady and risk-adjusted returns, income stability, capital preservation and inflation protection will be of paramount importance for any capital deployed during the year, including agriculture and timber,” TRS Illinois senior investment offer for real estate Tim Hayes told Agri Investor.

“TRS remains focused on creating a balanced allocation across other real assets over the long-term, both from a sector and a risk perspective.”

According to a Real Assets Tactical Plan presented to the TRS Illinois investment committee on August 27 and seen by Agri Investor, fiscal year 2021 will see the $53.4 billion pension invest $440 million in opportunistic real estate and $480 million into infrastructure, timber and ag.

The plan does not include details of the allocation breakdown between those three assets classes, which Hayes also declined to disclose.

TRS Illinois’ has a 20 percent real assets target that includes real estate – which is designed to constitute 16 percent of the overall portfolio and include core, value-add and opportunistic investments – and the above-mentioned “other real assets” grouping, for which the pension targets 4 percent of assets.

TRS Illinois’ has $227.2 million in existing infrastructure investments and $76.1 million invested in a category combining timber and agriculture, according to the plan.

The pension’s only ag-related real asset investment is a $75 million commitment to Proterra Food Fund I. Hayes confirmed that TRS Illinois has yet to make any timber investments.

The plan identifies the build-out of the “other real assets” portfolio as an area of focus for TRS Illinois within its real asset portfolio, and includes identification of a relevant benchmark for the grouping among initiatives for the coming year.

“Following an 11-year economic expansion, the US economy is in the midst of what is expected to be a significant economic downturn. The abrupt reaction to covid-19 led to record unemployment, business closures and a rapid decline in discretionary spending,” TRS Illinois staff wrote.

“The length of any given real estate market cycle varies, but it appears this downturn could have a prolonged and lasting impact on the economy.”