Illinois Teacher Retirement System Investing $1 Billion in Hedge Funds

In a somewhat controversial move, Illinois’ state Teachers Retirement System will invest nearly $1 billion in hedge funds over the next three years, according to the Chicago Tribune.    The $39 billion system is underfunded, involved in a kickback scandal and facing financial woes that include having only 62% of the money needed to meet its projected costs.   The TRS has not chosen its hedge fund managers yet, and some observers predict it will have a hard time finding the best ones, as accepting the money of public pensions can expose hedge funds to Freedom of Information Act requests from meddlesome competitors.   “Successful hedge fund operators can basically pick and choose who they want as clients,” said Howard Pohl, principal at Chicago’s Becker, Burke Associates financial advisers. “If they have to disclose their investment portfolio, the hedge fund guy says, ‘I don’t need you.’”   The system will limit its exposure to 2.5% of assets, which is lower than the 1% recommended by outside consultants to the system.   However, the $15 billion State University Retirement System for Illinois’ higher education employees has steered clear, mostly because of difficulties in tracking hedge fund trading activity, said Dan Slack, executive director. “When they tell us to ‘Just trust us,’” he said, “that makes us as a public fund very nervous.”   The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.