Illinois Universities invests $120m in ‘toxic assets’

The $12 billion State Universities Retirement System of Illinois has committed $120 million to the US government’s “toxic assets” programme to unfreeze the credit markets.

The pension, which has been mulling joining the programme for several months, committed $40 million each to funds raised by a partnership between Angelo Gordon and GE Capital Real Estate; RLJ Western Management and TCW Group.

“This is an opportunistic situation that, after doing quite a bit of research, we felt makes sense for SURS,” Dan Allen, chief investment officer of the pension, told PEO.

Nine firms qualified to participate in the US government’s programme that is intended to generate $40 billion in purchasing power to buy bad mortgage-related securities off the balance sheets of banks. The firms must raise a minimum of $500 million for the programme.

Seven of the qualified managers have reached the minimum fund raising threshold, including AllianceBernstein and its sub-advisors Greenfield Partners and Rialto Capital Management; BlackRock; Wellington Management; Invesco; TCW Group and RLJ Western Asset Management.

The programme has about $16.36 billion of dry powder. The seven managers have raised about $4.09 billion, which has been matched 100 percent by the US government, creating $8.18 billion. The US Treasury also has provided $8.18 billion in debt, increasing the available pool of capital to $16.36 billion.

Other firms that are still working to reach a first close include Oaktree Capital Management, Marathon Asset Management and the Angelo Gordon/GE Capital Real Estate partnership.

Several US pensions have committed money to the PPIP programme, including Connecticut, which invested $100 million with WL Ross IV, an affiliate of Invesco; $50 million to AllianceBernstein and $50 million to Marathon. New York State Common Retirement Fund, with $126 billion in assets, carved out $200 million to invest in the programme, but has not yet chosen a manager.

Meanwhile, the biggest pension in the US, the $200 billion California Public Employees’ Retirement System, has decided not to participate in the programme after months of review.

“We’ve not had any interest in the programme. While we hope it’s successful, at this time we don’t see it as the best risk/return trade-off for us,” a spokesperson for CalPERS said.