Kensington seeks custodian and increases equities
UK - The Royal Borough of Kensington and Chelsea (RBKC) is seeking a global custodian for its £409.6m (€478.9m) local government pension fund.
Kensington currently employs HSBC for custodial services, however the existing contract is scheduled to expire in the summer of 2009, so it is re-tendering a five-year contract to begin next year.
The successful applicant will be required to "provide safekeeping accounting, performance measurement and other services relating to the assets of RBKC pension fund", and the council revealed the process is starting early as "given the importance of the custodian's role in the security of the fund's assets and the extensive relationships it maintains with the fund managers, it is essential that sufficient time is allowed for the market testing process".
Minutes from a recent meeting of the RBKC investment committee showed the pension fund is considering slightly altering its asset allocation from 70% in risk-based assets - including equities, property and private equity - and 30% in bonds, to 80% in risk-based assets.
The pension fund's adviser, Hymans Robertson, told the committee modelling had indicated a slight advantage in moving towards an 80-20 split, while the committee noted that at the end of the financial year the asset allocation was already closer to an 80-20 allocation than 70-30 as a result of investments in property and private equity fund-of-funds and relative movement in asset values.
Documents showed after further discussion the committee agreed to change the allocation to an 80-20 split in favour of risk-based assets, on the basis that the current market situation meant it "represented sound investment sense", although the detail of how this would be carried out was to be decided at a later date.
In addition, the committee confirmed consideration of investing in alternative asset classes would now be deferred until the first half of 2009, although further decisions are still to be made on new benchmarks for the asset classes, and whether there should be a review of fund managers in relation to its switch from an overseas regional approach for active equities to a global approach.
The closing date for tender submissions for the global custodain role is 21 January 2009 and further information can be obtained from Hymans Robertson.
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