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UK MPs’ scheme to invest in hedge funds

UK - The around £280m (€414m) Parliamentary Contributory Pension Fund of the House of Commons is looking to award an £8m mandate to a fund of hedge fund manager.

The move comes amid a new head of pensions at the House of Commons and a deficit at the fund.

The new head of pensions is Jimmy Walker, former group pensions manager at Arla Foods. He did not want to comment on this investment decision.

"It is confidential. The trustees would not want us to pass that information to the press," he told IPE. Walker took over from Carol Perry who was appointed as one of six directors at Independent Trustee Services in July.

The fund's latest valuation as at March 31 2005 showed a deficit of £50m in the fund compared to £25.2m in 2002. This increase was mainly caused by a change in actuarial assumptions.

The then Leader of the House Geoff Hoon pointed out in a speech on March 30 that "investment returns were lower than expected".

"In common with most other pension funds and other investors in equity shares, the Fund experienced negative investment returns in the first year covered by the Government Actuary's report and positive returns in the subsequent two years.

"Although the investment returns over the three years as a whole were positive they were lower than had been assumed," Hoon said.

Investment return achieved on the scheme's assets over the three years since the last valuation was an average of 1.9% a year. From 2002 to 2003 it was minus 23.5%, from 2003 to 2004, plus 24.3% and from 2004 to plus11.3%.
   
After the general elections in May 2005 the scheme had 1,434 members, 641 of them active. IPE understands that this is the first time the scheme advised by Mercer Investment Consulting will invest in alternatives.

In 2005 the portfolio was invested as follows:
- UK equities 36%
- Overseas equities 36%
- British Government fixed interest stock 10 %
- British Government index linked stock 10%
- Property 4%
- Cash 1%

The deadline for the receipt of tenders is November 6. The number of operators invited to tender will be at least three but limited to eight.

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