UK – The Environment Agency has provided more details about the reasons for shifting its one billion-pound (1.4 billion-euro) Active Pension Fund to specialist managers.
The body has been in the process of shifting away from a balanced structure to specialists, a move expected to be in place by April 2005.
The move will see it cut its equity allocation to 70% from 78% and move for the first time into real estate and private equity – five percent each. The bond allocation will rise to 30% from 22%.
In a briefing note, the agency said its Pensions Committee had agreed that the traditional balanced manager approach “was no longer appropriate as the pool of skilled managers is shrinking and investment returns from this style if management have generally been disappointing”.
“It therefore decided that using specialist fund managers was the way forward, as have many other pension funds.” The review was led by Howard Pearce, head of environmental finance and pension fund management, advised by Watson Wyatt, Claros Consulting on SRI matters and law firm Osborne-Clarke.
It will also increase its allocation to sustainable environmentally responsible investment to seven percent from two percent and become a more active shareholder.
The new strategy will be implemented with the help of Mercer, Rathbone Greenbank and bfinance. “The Agency’s existing fund management companies have been invited and encouraged to re-apply for the new mandates,” the note said.
Incumbents include Legal & General, with a passive multi-asset balanced brief worth 36.7% of the scheme. Henderson Global Investors and Merrill Lynch have active multi-asset balanced briefs (30.5% and 30.3%). State Street Global Advisors have a passive UK equities mandate (2.5%).