Border to Coast appoints emerging market equity managers for £700m

Border to Coast Pensions Partnership, one of the largest UK local government pension scheme (LGPS) pools with approximately £60bn (€67.6bn) in total assets, has appointed four asset managers to run a new £700m Emerging Markets Equity Alpha Fund on behalf of its partner funds.

Following a comprehensive selection process, Goldman Sachs Asset Management and Baillie Gifford have been chosen to manage an emerging markets (EM) ex-China equity portion accounting for around two-thirds of the fund.

The two managers will join UBS and FountainCap, which will jointly manage a dedicated China equity section, making up around a third of the portfolio, Border to Coast announced.

Due to launch in spring 2023, the new fund will “complement Border to Coast’s existing internally managed EM proposition and broaden partner fund access to the diverse growth opportunities in EM economies”, the pool stated.

As a responsible investor committed to achieving net zero by 2050 or sooner, ESG and climate change considerations were a fundamental part of Border to Coast’s manager selection process, as was understanding each manager’s approach to active engagement, it added.

The fund’s carbon impact is expected to be considerably below its benchmark at launch, with analysis (as at 31 March 2022) suggesting its financed emissions will be between 30% to 50% lower.

Graham Long, head of external management at Border to Coast, said: “Our selected managers have an extensive presence in emerging markets, and we believe this specialisation – amplified by how we have structured the fund – strengthens our partner funds’ access to investment opportunities that deliver sustainable, long-term risk-adjusted returns. Each has a strong understanding of the ESG considerations in these markets and will ensure we can continue to proactively engage with portfolio holdings as an active steward of LGPS assets.”

Once launched, the fund will seek to outperform the MSCI Emerging Markets Index by at least 2% a year (net of fees) over rolling three-year periods.