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Illinois Teachers’ pension fund puts $40m into reinsurance with AQR


AQR Capital Management, an investment management firm based in Greenwich, CT,are the latest with a reinsurance-linked investment offering to benefit from a commitment of funds from a U.S. public body pension fund. The Teachers’ Retirement System of the State of Illinois is the 39th largest in the U.S. and manages the pensions and retirement funds of 366,000 members and had assets of $36.3 billion at the 30th June.

Interesting, the Illinois Teachers’ Retirement System is a perfect example of why interest in insurance-linked securities and reinsurance-linked investments are at an all time high this year. The Illinois pension fund reported a return of just 0.76% for the end of their 2012 fiscal year, on the 30th June. That compares to a return of 23.6% in the previous fiscal year and underscores the uncertainty and volatility in the world economy which is driving pension funds to look for less-correlated, low volatility alternatives, such as ILS, catastrophe bonds and reinsurance.

At their board of trustees meeting on the 26th October, the Illinois Teachers’ pension fund agreed to commit $40m from their fixed income portfolio to AQR Funds of Greenwich Connecticut for investments in reinsurance. AQR also manages $836.4m of of the Illinois funds assets in other classes.

It’s assumed that the $40m will go into the AQR Risk Balanced Reinsurance Fund, which is their main reinsurance only strategy investing directly in reinsurance transactions.

AQR Capital Management formed their reinsurance investment group back in July 2011 with a mandate to target investors such as pension funds and seeking to raise $250m in funds, although according to SEC documents they sold $150m of pooled investment fund interests at the start of 2012.

This is the latest of the large pension funds we’ve reported have allocated capital to the ILS and reinsurance sector via fund investments, a growing trend. Links to some of our articles detailing other pension funds allocations to the space can be found below.

Ohio Schools pension fund commits $30m to reinsurance & ILS through Nephila

RBS Group pension fund makes first allocation of assets to reinsurance

DaVinci Re sidecar takes investment from San Antonio state pension fund

UK council pension fund considering alternative investments including insurance-linked securities

Oregon Investment Council commit $100m to Nephila funds

Pennsylvania Schools pension scheme to invest in insurance-linked securities

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