IMRF’s Miller-May plans infra growth with caution

The US pension plan’s CIO also lauded the role of globally listed infrastructure as a route going forward for the Illinois fund.

The Illinois Municipal Retirement Fund will cautiously move forward with plans to grow its infrastructure portfolio over the coming years, as concerns around inflation and interest rates take hold.

Angela Miller-May
Angela Miller-May

The $57 billion public pension plan has a 3.5 percent allocation to infrastructure within its 10.5 percent real assets allocation. Angela Miller-May, who became IMRF’s chief investment officer in August 2021 after nearly 11 years at the Chicago Teachers’ Pension Fund, said the scheme will be looking towards the more defensive elements of infrastructure in this current market period.

“We’ve been leaning into more income-generating strategies in the current environment. We try to consider risks like interest rate risk and recession risk around any asset class,” she told Infrastructure Investor. “Infrastructure will perform better or similar to equities when inflation is high like it is now or when growth is slowing. We’re attracted to strategies that have the ability to pass on inflation or price increases to end users of infrastructure assets.”

She continued: “We’re maintaining our allocations or marginally changing them. We don’t know where inflation and interest rates are going to end up and right now is a really volatile market time. As we move our targets, we move them fairly slowly.”

IMRF made its most recent infrastructure investment last month, investing $50 million into the EnCap Energy Transition Fund II, which is believed to be targeting about $2 billion. Prior to Miller-May’s arrival, IMRF had been an LP in several of the Houston-based GP’s conventional energy funds, as well as an LP in its maiden energy transition effort, which closed on $1.2 billion in May 2021. Infrastructure Investor understands that fund is now delivering gross returns of over 40 percent.

“That’s our only manager that focuses on energy. We felt we needed energy in the portfolio for diversification reasons,” Miller-May explained.

While other private infrastructure commitments have been made by the pension fund to vehicles managed by Partners Group and JLC Infrastructure, IMRF last year also committed up to $200 million each to two globally listed infrastructure funds managed by Cohen & Steers and Brookfield, having initially invested in those funds in 2017.

“At CTPF, I was attracted to private infrastructure and hadn’t been exposed to listed infrastructure until I came to IMRF,” said Miller-May. “Observing the returns that we were getting from globally listed infrastructure and having less illiquid exposure helped to convince me of the benefits of listed infrastructure and its place in our portfolio. When we think about infrastructure, we have that lever to pull… we can allocate more money quickly into global listed infrastructure whereas it takes time to launch RFPs and select a private infrastructure manager. We have existing listed infrastructure managers already in our portfolio and it’s a matter of allocating money at the approval of our board.”

Looking at the IMRF’s priorities for the asset class in 2023, Miller-May said it will analyse opportunities as current managers come to fundraise, but there is little wiggle room.

“We have a lot of dry powder in alternatives, and we’re a little over target because of the denominator effect,” she said. “We’re being prudently cautious and trying to assess the impact of rising interest rates in each asset class.”