Durham completes asset allocation 'shake-up'
UK - Durham County Council has completed its shake-up of the local authority pension fund's investment strategy, and replaced three balanced mandates with six awards, including an 8% allocation to global property.
The £1.5bn (€2bn) local government pension scheme said the new manager mandates are intended to yield higher returns and reduce contributions from employers.
Following a lengthy process, applications for the six tenders closed in November 2006 and Durham County Council has now allocated 48% of the fund to equities, 36% to bonds, 8% to global property and 8% to a dynamic asset allocation fund.
Royal London Asset Management has been awarded a 20% share of the fund through a £260m mandate to manage investment grade bonds, while 16% of the fund, or £210m is to be invested in global bonds under Alliance Bernstein.
The equities allocation has been split between BlackRock Investment Management, which is responsible for 19.2% of the pension scheme assets through a £270m UK equities mandate, while Edinburgh Partners has been appointed to run the £375m investment into global equities, representing 28.8% of the total fund allocation.
In addition, the pension scheme has awarded CB Richard Ellis Collective Investors a £100m global property mandate, which Durham confirms will invest on at least a pan-European basis with a target return of 5% a year above UK retail price inflation (RPI).
The pension fund also confirmed it has appointed Baring Asset Management to run a £100m dynamic asset allocation mandate, which it said will consist of a fully-diversified global portfolio.
Durham, which announced its intention to replace the three previous mandates - run by Baring, Legal & General Investment Management and Morley - at the end of 2006, said the changes have increased the allocation to assets "which will contribute to the stability of the fund's returns, while offering comparable returns to those available from equities". (See earlier IPE.com story: Durham shakes up £1.3bn council pension fund portfolio)
Brian Walker, Durham county councillor and chairman of the pension fund committee, said: "The committee expects to see improved returns by the award of these challenging mandates, with the aim of ultimately reducing employer contributions."
The pension fund, which has almost 20,000 contributing members and 14,000 pensioners, was advised by PSolve, Phillip Williams, and by legal advisers Dickinson Dees, while JP Morgan acted as transition managers, dealing with the re-allocation of the investments.
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