UK - The London Borough of Camden has started the restructuring of its pension fund portfolio, issuing tenders for passively-managed securities, fixed income and active global equities.

The passive mandate is valued at between £100-500m (€125-625m), and will consist primarily of UK equities, although it may also include index-linked bonds and some global equities.

The £80m fixed income portfolio can include pooled or segregated approaches but will be expected to outperform a benchmark of a sterling broad market composite index of credit and conventional UK gilts by 1% over a rolling three to five year period.

The global equity mandate is valued at around £400m although Camden pointed out this could be split between two managers, and will have a target to outperform a global market-cap weighted benchmark by 2-3% over a three to five year period.

The pension fund, valued at £772m (€970m) at the end of March down from £830m in December, has employed Schroders, UBS and Baillie Gifford since 1992.

But the fund's investment committee has been concerned by recent underperformance. Baillie Gifford, managing UK and overseas equities, has been the exception, outperforming its benchmark over one, three, five and ten years. Schroders is close to its benchmark throughout, prompting the committee to note that the figures seem to back up the theory that Schroders tends "to follow a more passive approach".

UBS, which like Schroders manages a mixture of equities, bond and property, underperformed by 2.4% over one year and 2.1% over three years.

Ken Bumpus, pensions officer at Camden council, said despite the restructuring the scheme is "not necessarily going to get rid" of the existing managers, but given their long tenure, is "having a look around to see what is out there".

Meeting documents revealed the restructuring process, which is estimated to cost £4m and increase fund manager fees from £1.2m a year to £2.8m, is to take place in two phases, with the first part consisting of appointing the equity and bond managers.

A final decision on the exact split between active and passive management and between UK and overseas equities - suggested by the scheme's advisers, Hymans Robertson, to be 25% UK and 40% overseas - will take place once the managers have been selected and fee levels "have been established".

Once the equities and bonds are in place, which account for around 80% of the scheme's assets, Bumpus confirmed the fund would also be issuing tenders for property and alternative managers - most likely fund of fund managers - which would look at "all" the alternatives options including hedge funds, private equity and infrastructure.

The strategy outlined in recent committee documents showed the scheme is looking to invest 10% of its assets in alternatives - following a reduction in UK equity exposure - while property investment would also increase from 10% to 12% with an additional focus on overseas property.

The most recent triennial valuation for the Camden scheme revealed the deficit had increased from £193m in 2004 to £199m at 31 March 2007, although the funding level of the scheme improved from 73% to 80%.

Applications should be submitted to Hymans Robertson, and the closing date for the global equity and fixed income tenders is August 18 2008, while submissions for the passive portfolio should be received by September 1 2008.

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