Illinois Pension Board Axes All Active Managers

The Illinois State Board of Investment, which oversees several state pension funds, voted on Thursday to axe all active managers in the portfolio of the state-administered 401(k) plan.

About 52,000 residents are enrolled in the defined contribution system, which can be chosen by workers instead of a traditional defined benefit.

The shift came down to two things: performance and fees.

More from the Wall Street Journal:

The Illinois State Board of Investment, in a 7-to-1 vote on Thursday, jettisoned mutual funds sold by T. Rowe Price Group Inc., Fidelity Investments, Invesco Inc. and four others.

The pullback means roughly $2.8 billion of Illinois state-employee retirement assets—representing roughly two-thirds of the $4 billion fund—would now be in the hands of Vanguard Group and Northern Trust.

The shift would dramatically reduce outside management fees paid plan-wide, dropping from more than $10 million annually to $1 million, Marc Levine, the board’s chairman, said in an interview. On a per-participant basis, it equates to fees being shaved to about one-fourth of the previously paid total.


The shift means Illinois state workers, legislators and judges—those participating in the 401(k)-style fund—would choose from between seven categories of investments rather than 16. All the holdovers will be so-called “passive” funds that strive to imitate, not outsmart, the markets.

“We’re taking all that complexity out,” Mr. Levine said.

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