Barking & Dagenham appoints Aberdeen as it overhauls strategic asset allocation
London’s Barking & Dagenham local authority scheme is to cut its exposure to global equity, instead allocating £50m (€63m) to a diversified alternatives mandate managed by Aberdeen Asset Management.
The £666m fund also said it had drawn up a shortlist of managers for a proposed social housing mandate, but did not disclose their names.
The appointment comes as the scheme agreed a new strategic asset allocation, cutting its global equity exposure by 6 percentage points to 45%.
It also cut 1 percentage point from its strategic allocation to global credit and senior loans.
Barking & Dagenham said the majority of the funding for Aberdeen’s mandate would come from equities, with a further £12m drawn from cash holdings.
Aberdeen was appointed only six months after the fund first tendered the mandate, beating 10 rivals to the position, and will be expected to return 4-5% above LIBOR.
According to a report from the fund’s most recent pension committee meeting, it will also push ahead with plans to invest in social housing, examining two possible mandates recommended in a report by consultancy Aon Hewitt.
The social housing investment would be part of its attempt to reach full funding, with the report describing the asset class as a “fairly secure investment” that could return 2-3% above index-linked Gilts.
The local authority currently hopes to achieve full funding by 2033, raising coverage above the 71% funding it reported as part of its triennial valuation.
Barking & Dagenham, one of the local authority schemes invested in a £700m Hermes Fund Managers vehicle, which last week announced £201m in new capital, also confirmed the amount committed by the Santander UK Group Pension Scheme.
Reporting on HIF’s performance, the fund noted that Hermes held a second close at the end of last year, which saw an £80m commitment by the Santander scheme.
“As a result, Hermes made a capital distribution on 24 January of approximately £5.8m,” the report added.
Hermes was tied with Baillie Gifford as the fund’s best performing manager when measured by benchmark outperformance over the past 12 months.
The firm, actively managing a £114m equity mandate, was also ahead of Hermes whem measuring absolute return performance, returning 12% compared with 11.2% for Hermes over a 12-month period.