The Illinois Treasurer’s office is tapping inflation-hedging investments — and working to benefit its home state while doing it.
The Office of the Treasury which manages some $55 billion in capital, announced last week that it had made its first investment through a new infrastructure fund. The $75 million allocation to Ullico Infrastructure, kicks off the evergreen investment effort, called FIRST Fund.
The platform, established via legislation in 2021, will deploy up to five percent of the Illinois Treasury’s assets to real asset investment managers. At present, that’s $1.5 billion, which will be invested over the course of several years.
The twist on the platform is that it’s designed to directly benefit the state: For every $1 the fund invests, the manager that invests that capital has to put $2 to work in projects based in Illinois.
“This is the first in the nation in terms of the fund,” State Treasurer Michael Frerichs said by phone. “We view this as an investment fund, but it’s also an impact investment vehicle. We think that by investing $1.5 billion, we can catalyze and spur the economy.”
The plan for the fund is to invest about $250 million annually in investment managers. FIRST Fund will not be making direct investments in real assets. Since the fund is evergreen in nature, it will reinvest capital as it receives distributions. The plan is to invest between $25 million and $75 million in each fund.
Illinois is getting help on the program from an industry heavy hitter — RockCreek Group. The $15 billion firm is serving as an investment advisor to the treasurer’s office, providing information on new investment options and strategies for the FIRST Fund.
The timing is right for this type of strategy. The Inflation Reduction Act, which passed last August, is spurring growth in the infrastructure sector.
“Not only can we make money off of infrastructure investments, but the spillover will be seen in the form of an increase in GDP and growth in the state,” Frerichs said.
Ullico, the premier fund tapped by Illinois, invests in power, utilities, energy, transportation, and digital infrastructure. Ullico has previously invested in projects based in the state, including CenTrio Energy, which is a cooling solution provider for offices, residential and retail properties, data centers, and schools.
In Frerichs’s view, Illinois is the perfect place to execute the program. “We’re the country’s transportation hub. Our region stands to gain more than most by leveraging our existing network of railways, roadways, and bridges.”
