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Illinois Teachers’ delves into secondaries

The $37bn retirement system is issuing an RFP for a consultant to assist in the engagement of the private equity secondary market.

The Teachers’ Retirement System of the State of Illinois board of trustees voted to issue a request for proposal for a secondary market consultant as part of its private equity tactical plan this week, spokesman Dave Urbanek told Private Equity International.

Urbanek did not specify whether the consultant would assist the $37 billion retirement system in engaging the market as a buyer or seller, though he did say it could be both.

“It’s not even known at this point whether we would sell any private equity assets,” he said. “The goal is to create some flexibility and some more options.”

The retirement system’s 2011 private equity tactical plan included the “enhancement of its secondary market capabilities”, according to minutes of its June 2011investment committee meeting.

Illinois Teachers’ has expanded its private equity strategy in recent years, adding a co-investment programme in 2010. The retirement system issued an RFP for that programme in December, having already invested $40 million alongside Stone Point Capital for mid-market financing firm NXT Capital earlier that year.

The retirement system already had TorreyCove Capital Advisors and LP Capital Advisors as co-investment advisors at the time of the RFP. Investment staff is reviewing proposals submitted from that RFP, which closed 16 August, Urbanek said.

The secondary market has emerged as an important tool for limited partners who are restructuring their portfolios. Earlier this week, New York City’s pension system announced that it had completed the sale of almost $1 billion in private equity interests on the secondary market this year. The sale was completed in two tranches, with approximately $520 million unloaded in March and $456 million sold in July, private equity head in the city’s Comptroller’s office Barry Miller told Private Equity International.

The strategy behind LP secondary sales can vary. In New York City’s case, the restructuring was driven by a desire cull manager relationships from its already massive private equity portfolio, Miller said. The State of Wisconsin Investment Board’s recent sale of approximately $1 billion in private equity commitments was motivated, at least in part, by the decision to move away from publicly traded firms whose alignment of interest with LPs may have been negatively affected by their obligations to public shareholders, according to documents.

Illinois Teachers’ private equity holdings were valued at $3.8 billion as of 31 March, good for 10.4 percent of its overall investment portfolio, according to its website.