UK roundup: Brunel launches first tenders; FCA warns over pref shares
Brunel Pension Partnership – one of eight Local Government Pension Scheme (LGPS) pools – has launched its first tenders for pooled equity mandates.
It is seeking managers for a UK equity mandate worth an estimated £1.2bn (€1.4bn) and a low-volatility equity allocation of roughly £600m. Both figures are subject to change depending on actual demand from Brunel’s 10 founder funds.
The pool – which aims to consolidate its member funds’ £28bn of assets – said it expected to appoint two managers per mandate.
Mark Mansley, CIO at the pool, said: “UK equities is still an important allocation for many investors and we look forward to hearing from managers how they manage diversification in this relatively concentrated market, and, importantly, their approach to stewardship.
“Low volatility is one of the most intriguing areas of the smart beta revolution and a good fit for investors seeking to reduce equity risk. We are particularly interested in hearing from managers able to address risk of valuation bubbles in low volatility strategies, and able to use ESG considerations to help further reduce risk.
“Finally, as always, we are interested in hearing from investment managers with a clear, consistent process, willing to be open about their culture and human capital management, and committed to transparency. Clarity and brevity in tender documents will also be a benefit.”
Brunel called for initial expressions of interest by 14 May, from which it would draw up a shortlist for full tenders.
Regulator calls for clarity over preference shares
The Financial Conduct Authority (FCA) has written to issuers of “permanent” fixed income shares in an attempt to foster greater awareness among investors of any factors that might affect the value of their investments.
In a “Dear CEO” letter sent to irredeemable preference share providers, Andrew Bailey, CEO of the UK regulator, cited Aviva’s recent U-turn on its decision to cancel £450m of preference shares.
Investors suffered when the value of their preference shares fell following the initial cancellation announcement. The insurer later reversed the decision.
“As far as we are aware, other listed companies with irredeemable shares, or similar types of shares, have not clarified their position,” Bailey wrote.
Other companies issuing preference shares should ensure their investors were in possession of all the facts, he added, including access to terms and conditions and being kept abreast of any changes.
“We recognise that there is a tension between investors’ desire to see a permanent resolution to any remaining concerns and the desire of company boards not to limit their (and their successors’) scope for action,” Bailey said.
“However, in the event that you have publicly stated or propose to publicise your company’s intentions regarding such securities, I would urge you to also set out the governance process and the approach to disseminating any future changes you might make.”