The £3bn (€3.6bn) Devon County Council Pension Fund is to allocate £250m to a smart-beta equity strategy, while disinvesting from an active mandate.

Launching a tender, the fund said it was seeking to appoint a manager for an alternative indexation equity mandate, made up of a blended strategy.

The fund also decided to terminate its mandate with Sarasin and Partners, an investment manager currently operating an active global equity strategy for the scheme.

According to committee minutes from September, the termination of the contract will coincide with the launch of the tender for the smart-beta strategy.

Its new mandate will require a mix of value, quality and low-volatility strategies, while avoiding single-factor dependency.

This should be provided on a fixed-allocation basis rather than a dynamic-allocation approach, with investments global and unhedged.

It said interested managers should use widely recognised benchmarks, and that investments should be managed on a long-only basis.

Devon Pension Fund said it would only consider managers with a breadth of experience that manage a minimum of £2.5bn in alternative indexation strategies.

At the end of June, the fund allocated 60% of assets to listed equity, split 20-40% between active and passive strategies, respectively.

A move away from active management had already begun from March 2013, where the fund allocated 23% to active management and 37% to passive.

The general use of alternative indexation strategies has grown in recent years, with significant uptake in 2014.

European institutional investors are expected to invest as much as €211bn in smart-beta strategies by 2017, according to market intelligence provider Spence Johnson.

However, this will be at the expense of both active and passive mandates, with research from State Street Global Advisors (SSgA) showing that 75% of institutional investors see smart beta as a replacement for passive strategies and 64% for active.

The pension fund’s latest published report showed it invested with SSgA and UBS Global Asset Management for its passive exposure.

It also used Aberdeen Asset Management and the soon-to-be-dismissed Sarasin and Partners for its global active exposure.

The fund also has 15% invested in diversified growth funds, managed by Baring Asset Management and Baillie Gifford.

In January, the fund said it would cut its equity exposure, as it had overshot its target by £150m.

In turn, it moved the assets into infrastructure, investing £40m with Aviva Investors and $50m (€37.2m) with First State.

The move away from equities to infrastructure came as the pension fund’s committee acknowledged that it had strayed from its strategic asset allocation, and that its low exposure had failed to generate enough diversification within the fund.

However, it still remains 5 percentage points above its targeted equity holdings and 2 points below for infrastructure.