Fidelity loses Tyne & Wear's UK mandate

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  • Fidelity loses Tyne & Wear's UK mandate

UK - The £3bn (€3.25bn) Tyne & Wear Pension Fund has confirmed it terminated its UK equity mandate with Fidelity at the end of last year.

At the South Tyneside Pension Committee Meeting last month members were updated on the “action taken to terminate the UK active equity mandate with Fidelity”, which was valued at around £300m.

The decision to terminate the mandate was agreed in December 2008, and the assets have now been transferred to a passive UK equity mandate “pending a review of what we are going to do”, although the pension fund declined to comment on why the Fidelity mandate was terminated.

Figures from the pension fund’s annual report for 2007/08 showed at the end of March 2008 the value of the Fidelity UK equity portfolio dropped almost £35m over the year from £418.6m to £383.8m - around £80m higher than the value of the mandate when it was terminated - with the second highest loss, posted by Capital International’s global equity mandate, almost £10m lower with a fall of £26.5m to £358.6m.

According to the pension fund’s statement of investment principles, updated in September 2008, the scheme has a target asset allocation of 27.5% in UK equities, including a passive mandate run by Legal & General, while 40% is allocated to overseas equities, 22.5% to fixed income and the remaining 10% to property.

Within this, 3% of the allocation to passive US equities is invested in actively-managed currency funds, while the scheme is also intending to build up a 7.5% allocation to private equity over a number of years and funds “top-sliced from the allocation to quoted equities”, while up to 1% of the fund is being allocated to infrastructure funds from the gilts portfolio.

As a result, the annual report pointed out at the end of March 2008 the investment strategy was 59.5% in quoted equities, 21% in bonds, 10% in property and 9.5% in alternatives - comprising 3% currency, 5% private equity and 1.5% infrastructure - although an updated asset liability modeling recommended the fund should increase its alternative allocation to 18%.

This includes a 2.5% increase in private equity; a 1% increase in infrastructure investments and allocations of 2.5% each to absolute return strategies and in overseas property, funded through a reduction in the quoted equity and bond allocations, resulting in a target allocation of 55.5% in equities, 16.5% in bonds, 10% in property and 18% in alternative investments.

The report noted the changes to the strategy “are being phased in as appropriate investment opportunities are identified”, and would “lead to changes to the investment management structure. In particular, a second global equity mandate is to be introduced, financed by reductions in the existing regional equity mandates”, however the scheme confirmed there is “nothing planned” for the immediate future.

Meanwhile figures supplied to the pensions committee in September 2008 showed the funding level of the pension scheme dropped from 79% in March 2007 to 64% in June 2008, on an ongoing basis using valuation assumptions, but on a low risk basis using a gilt rate the funding level fell to around 50% in June from 63% the previous March.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email

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