The sharp exchange of views between the London Borough of Croydon and its dismissed manager Foreign & Colonial has overshadowed significance of the shift in asset allocation by this major local authority scheme, with £310m ($505m).

The borough let it be known that it dropped F&C from a £26m UK small cap brief as a result of poor performance" by the investment house.

This was is response to a public statement made by the F&C's institutional marketing manager Nigel Morecroft, asserting that the company had been dropped in consequence of "an asset allocation shift and for no other reason".

The pension fund has appointed Barr Rosenberg European Management in London and RCM Capital Management in San Francisco to run two separate US small cap stock briefs of £15m each.

Commenting on the change in asset allocation, Croydon's treasury manager Ivan White says: "We're seeking to get added value from smaller caps which outperform and we're going into the US now for longer-term payback."

Croydon borough was advised by Watson Wyatt. Nicholas Watts of the consultants says:"We helped the borough to replace F&C, but it was not a like-for-like replacement, as there was a change in strategy. "Whilst F&C had had a disappointing performance, their brief was only to invest in UK small caps."

Bob Crew"