UK – Local authority pension funds in the UK, which together represent some £90bn (€142bn), are increasingly turning to the use of specialist managers, particularly for fixed income, according to Pensions Investment Research Consultants (PIRC) in its latest annual local authority pension fund yearbook.
PIRC’s managing director and the yearbook’s editor, Alan MacDougall, gives two reasons for the trend towards specialist managers.
“The downturn in the equity markets in the last couple of years and the fact that local authority pension schemes are required to be 100% funded have led to the changes in their asset allocation strategies in favour of fixed income. Fixed income is considered more reliable and stable in times of market volatility,” MacDougall explains.
According to MacDougall, the perception among the local authority funds is that specialist management also adds added value. “Balanced managers often show varying degrees of competence when managing different asset classes. It is logical to suppose that isn’t true of a specialist. The move towards specialist management is also a reflection of the recent trend towards fund specific benchmarking.”
The PIRC Local Authority Pension Fund Yearbook covers every local authority pension fund in England, Scotland and Wales and provides a breakdown of the investment and administrative arrangements of each fund.