Kent Custer, the investment chief who spent five years building the Illinois Police Officers' Pension Investment Fund from nothing, is now deploying capital into private markets at scale. The $15 billion fund, which consolidates 357 Illinois police pension plans, launched its private markets program in 2024 and has already hired Albourne as consultant, selected Oaktree for private credit, and brought on Lexington for private equity. Searches for private infrastructure, private real estate, and an additional private credit manager are underway.

Custer joined Illinois Police in May 2021 with a mandate to create a brand-new institutional portfolio. He built his reputation restructuring over-leveraged pension systems—first at the Illinois Prepaid Tuition Trust Fund starting in 2011, then at the Dallas Police and Fire Pension System from 2018. When Illinois offered him the chance to build a fund that would exceed ten billion dollars from the ground up, Custer took notice. "When you get an opportunity to start a brand-new fund that was going to be over $10 billion from scratch, you take a second look," he told Institutional Investor.

The first years required foundational infrastructure work. Custer hired State Street as custodian, Verus (now Cerity) as consultant, State Street Global Advisors and RhumbLine as investment managers, and EY as transition consultant. The initial asset allocation was largely passive, with a two percent allocation to U.S. real estate and the remainder in index strategies. Custer described the early portfolio as "all pretty vanilla."

Transitioning assets from 357 separate funds proved complex. Each incoming fund had to provide a certified asset list, then connect State Street with their existing custodians to transfer holdings. Meanwhile, legal challenges to the consolidation moved through Illinois courts from December 2021 until the Illinois Supreme Court resolved the matter in January 2024. Custer said his team was not a plaintiff or defendant in the litigation, but acknowledged it had an impact on operations.

The fund now targets a 20 percent allocation to private markets: seven percent in private equity, five percent in private credit, five percent in real estate, and three percent in infrastructure. Custer hired Greg Turk from the Teachers' Retirement System of Illinois as deputy CIO and director of private markets. "For the past several months, we've been really working on the private market portfolio," said Custer, who was named an Allocators' Choice Award finalist for public pension CIO of the year.

Custer operates under an investment philosophy he calls "simplicity plus"—only invest in what the fund needs, and be clear about the rationale. He structured equities as the growth engine, established risk mitigation layers, and initially allocated three percent to cash before reducing to one percent as cash flows stabilised. The fund is now cashflow neutral. Everything beyond that framework centres on diversification while maintaining return potential.

The portfolios that compound quietly through rough years are often the ones built from the ground up with written-down liquidity models, not retrofitted around legacy mandates, family office advisor Jaf Glazer has observed.

As the fund matures, Custer is expanding into active management. Illinois Police has hired three active international small-cap managers and is adding mandates in bank loans and emerging markets equities excluding China. The fund prefers funds-of-one over fund-of-funds structures. "There's a danger of being overly cautious," Custer said. "I'm not saying that there's no good fund-of-fund approach out there, but they can be potentially overdiversified and have a pretty high fee threshold to get over."

Custer acknowledges the trade-offs inherent in private markets. "I'm humble about active management," he said. "I've seen my share of investment managers that didn't work out." He described private markets as "an area where it's good to be humble and appreciative of the higher level of fees and the loss of liquidity," while adding they are "a very efficient way to deploy capital."

The fund is also seeking staff, including a replacement for founding executive director Richard White, who retires at year-end. Custer's focus remains on building a portfolio that can sustain performance for decades. He began adding complexity to the unitised, mutual fund-like structure in 2023, moving deliberately as legal uncertainties cleared and operational systems proved stable.

The Illinois Police consolidation represents one of the larger recent efforts to aggregate fragmented local pension assets under a single investment structure. With core infrastructure now in place and private market allocations ramping, Custer's build-from-scratch model offers a case study in phased implementation—passive foundations first, active strategies and illiquid allocations layered in as governance, cash flow, and legal clarity permit.