Devon outsources assets to four new managers
UK - Devon County Council has appointed four new investment managers to its £1.87bn (€2.19bn) pension fund following a decision last year to outsource a large proportion of its in-house managed assets.
The council also agreed in May 2008 to terminate a ‘balanced’ investment management contract run by Capital International, following a disappointing performance, and transitional arrangements were put in place until new fixed interest and equity managers were appointed. (See earlier IPE article: Devon seeks managers after Capital sacking)
The Council has now equally split a £300m “specialist portfolio in fixed interest assets” between Lazard Asset Management and Wellington Asset Management following submissions from 24 providers.
In addition, a £180m specialist portfolio in global equity assets, previously administered by Devon County Council, has been awarded to Aberdeen Asset Management and Sarasin & Partners, with each firm running a portfolio of £90m.
Latest figures from the pension fund’s statement of accounts for 2008/09 showed the net assets of the fund dropped from £2.16bn in 2008 to £1.78bn by the end of March 2009 as the net loss on investments was £414.7m. The scheme’s assets were run by the in-house team and just two external managers - UBS and State Street - following Capital’s termination.
However, a report from the council’s finance director, to be presented at a meeting of the investment and pension fund committee today, showed the value of the pension fund had increased over the second quarter of this year to £1.87bn, following an investment return of 5.4%.
A breakdown of the fund’s asset allocation meanwhile showed the target strategy is 30% in fixed interest - including bonds/cash, property and infrastructure - while the remainder is in equities split between UK, overseas, alongside property and infrastructure.
However, the actual allocation of the fund at the end of June 2009, including active managers, was 38.5% in fixed interest - of which 34.9% was in bonds/cash - and just 61.5% in equities with 28.6% in UK assets and 29.3% overseas.
The report confirmed the target range of plus/minus 2.5% tolerance in the asset split “has been exceeded by 11.9% (absolute), caused by the volatility in both equity and bond markets (during 2008/09) and the high levels of cash held on deposit by the fund”.
It noted committee members had agreed in February 2009 to address the imbalance, so cash was being allocated for equity investment in a “measured move” over the last five months - £65m was invested between March and July - and said “when the transition to the new managers is actioned in this current quarter, a further reallocation from cash to equities will also assist in this re-balancing process”.
Elsewhere, the £350m Parliamentary Contributory Pension Fund (PCPF), for Members of Parliament, government ministers and other parliamentary office holders, has appointed Northern Trust as its provider of custody services.
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