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Illinois State Universities drops RREEF from two portfolios

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  • Illinois State Universities drops RREEF from two portfolios

NORTH AMERICA – The State Universities Retirement System of Illinois has ended two relationships with RREEF on separate portfolios with a total value of $325m (€243m).

The first was a $125m investment into the RREEF America REIT II, while the second a $200m commitment to a public real estate securities mandate.

Daniel Allen, CIO at the scheme, said: "The pension fund board and our investment consultant Callan Associates felt there were too many organisation issues with RREEF and Deutsche Bank and believe it would be best to discontinue the relationship for both portfolios."

RREEF America II is an open-ended core fund managed by RREEF that invests in the four main property types in the US. 

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Illinois State Universities has filed a redemption queue to exit the fund. 

"We are hopeful of being able to get our capital out of the fund by late spring of this year," said Allen.

Illinois State Universities also decided to move a global investment strategy with RREEF into the BlackRock Global Real Estate Securities Index fund. 

"The pension fund board felt the best decision at this time was to move the portfolio into a passive index fund," Allen said.

"At some point in the future, we might consider looking at conducting a search to hire an active manager for the portfolio."

Illinois State University has completed its search for new core open-ended commingled fund managers. 

It has hired JP Morgan Asset Management for its Strategic Property fund and Heitman for its American Real Estate Trust. 

Both funds were awarded an allocation of $150m. 

"It's our expectation that it will be six to nine months before our commitments are called by the managers," Allen said.

Out of 22 applicants, the search was narrowed down to three finalists. 

The other manager considered for the search was AEW Capital Management for its Core Property Trust fund.

Illinois State Universities has a real estate portfolio valued at $1bn, as of the end of 2012. 

The portfolio makes up 7.4% of its $14.3bn of total plan assets. 

The new commitments are set to raise the real estate allocation, which has a target of 10%, to 8%.

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