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Berkshire halves equity assets under new strategy

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UK - The Royal Borough of Windsor and Maidenhead has finalised the remaining manager appointments for its diversified strategy for the Royal Berkshire Pension Fund, which includes more than halving the fund's equity allocation to 32.5%.

Contract awards for the first wave of three manager appointments, comprising property, hedge funds and infrastructure, were issued earlier this week following the release of seven investment mandates in July 2008. (See earlier IPE article: Berkshire completes first set of mandates)

The pension fund has now unveiled the remaining appointments for active currency, commodities, high-yield bonds and emerging market debt bonds, as part of its strategy to "move away from traditional Local Government Pension Scheme (LGPS) investment policy towards a broader and more global portfolio".

Stone Harbor has been appointed to the emerging market debt portfolio, while the other mandates have been divided between two or more managers, so Muzinich and Legal & General taking on the high-yield assets, while commodities will be run by Morgan Stanley and Neuberger Berman and the active currency portfolio is split between The Cambridge Strategy, FX Concepts and Neuberger Berman.

Councillor John Lenton, chairman of the Berkshire pension fund, said: "We are transforming this fund, and these appointments, which are the first stage of reforms to meet the extreme problems facing all funded defined benefit pension funds, will free us up to invest wherever we can obtain the best returns."

Having finalised the appointments, the council confirmed there will be changes to the asset allocation of the £1.05bn (€1.17bn) Berkshire fund, as equities will be reduced from 70% to 32.5% - more than halved - and within this listed equities will be cut to 22.5% and the private equity allocation is doubled from 5% to 10%.

Bond allocations will meanwhile rise from 19% to 24%; and property assets will increase to 10.8% but the fund will avoid direct investment in favour of specialist indirect funds.

Three new asset classes have also been introduced as part of the diversification strategy consisting of 9.2% in commodities; 6% in infrastructure and 17.5% in other alternative investments including hedge funds, absolute returns funds and currency.

Nick Greenwood, Berkshire Pension Fund manager, pointed out: "We have always managed carefully - no Madoffs or no Landsbankis - with due diligence checks on our fund managers and insistence on transparency so that, using the internet, we can see exactly where our funds are invested at any time."

Elsewhere, Wandsworth Borough Council is seeking a global custodian to provide services for its £650m local government pension scheme.

The contract will be for an initial period of three years - beginning September 2009 - although there will be the possibility for a further three year extension by mutual agreement. The closing date for tender submissions is 1 July 2009 and further information can be obtained from Wandsworth Council.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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