UK - Croydon Council is seeking a supplier for the combined roles of providing Tactical Asset Allocation (TAA) advice to its pension fund while also managing a £25m (€28m) Global Tactical Asset Allocation (GTAA) mandate.
The London council is asking for expressions of interest for managers prepared to take on the combined role as it warned the three-year contract, which can be extended for a further three years subject to performance, would not be separated.
As part of the contract, Croydon is seeking one or more managers capable of advising on the TAA of the pension fund, which has an approximate asset value of £450m - down from the £527.6m recorded at the end of March 2008.
It revealed the remit of the TAA manager would be to "advise the Pensions Committee of the Fund on tactical allocations between the main asset classes", although this is subject to agreed tolerance ranges for each asset class - including quoted global equities; bonds property, absolute return funds, private equity and cash.
In addition, Croydon confirmed the GTAA mandate is valued at around £25m with an outperformance target of between 15-30% per year, net of fees, over a rolling three-year period, though it added while pooled funds are preferred all management styles will be considered including quantitative, fundamental and thematic.
Figures from the last pension fund annual report for 2008 showed the scheme returned -3.6% in the year to March 2008 because of its high equity allocations, resulting in the net asset value of the scheme falling from £544.6m to £527.6m.
The report noted at the end of March 2008 all equity holdings were held in passive funds to aid in "reducing the risk of investment manager underperformance" with 60.1% of the scheme held in passive UK equities and 26.9% in passive global equities.
The remainder of the scheme's assets included a £40m, or 0.9% investment in property finalised in April 2008, and 2.5% in private equity while the rest was invested in an in-house cash deposit account and non-cash current assets.
But following a review of the asset allocation strategy, the report revealed, the Pension Fund Committee agreed to revise the strategy in order to have "a more consistent level of return that is aligned with the Actuary's 25-year recovery plan".
The new target allocations listed for 2008/09 and 2009/10 now comprise 50% in UK and overseas listed equities, 30% in bonds, 7% in property, 1% in cash and then 4% to each of the asset classes of private equity, active global equity portfolio investment and funds and hedge funds.
The closing date for applications for the tender is 3 July 2009 and further information can be obtained from Croydon Council or Mercer.
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