UK - The £1.8bn (€2.1bn) Avon Pension Fund is stepping up its responsible investor credentials by endeavouring to meet the UN's strict principles of responsible investment (UNPRI) through a new mandate.
In its search for a global unconstrained equity manager, which will be responsible for running 10% of the fund (£180m), the local authority scheme said the mandate's contract notice would stipulate its UNPRI ambitions.
The Avon pension fund is also tendering for a proxy voting service to raise standards of corporate governance. The scheme is already a member of the Local Authority Pension Fund Forum (LAPFF), which promotes public pension funds' investment interests, but this does not provide shareholder voting services.
In spite of the Avon scheme's enthusiasm for responsible investment it noted that SRI manager Jupiter Asset Management, which runs just 3.6% of the total assets, had contributed significantly to the fund's underperformance in 2009.
Avon's assistant investments manager stated: "The underperformance of the fund against the customised benchmark over the year to 31 December 2009 was largely explained by the underperformance of Jupiter against its benchmark.
"The SRI constraints in [Jupiter's] mandate tended to favour investments in small caps, which were the first to suffer in a recession, but tended to recover quickly. Jupiter's performance was strongly linked to the performance of small companies."
Consequently the local authority pension fund is considering broadening Jupiter's mandate to allow the manager more freedom to invest in different types of sector and company.
However, members of the Avon pension fund committee are yet to agree that such a move would be beneficial to Jupiter's long-term performance and have already voted against allowing the manager to invest in UK ‘extractive' (oil, mining, gas, etc.).
Jupiter is to be invited to address the pension fund committee to discuss how the mandate may change in future.