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Gwynedd tenders active bonds portfolio

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  • Gwynedd tenders active bonds portfolio

UK - Gwynedd Council is seeking an active bond manager for a £100m (€113m) active bond mandate for its local authority pension fund following a recent review of its investment structure.

The Welsh authority has tendered for a manager to run an absolute return bond portfolio, valued at around 15% of the fund's assets, or £100m, to take the opportunity to obtain better performance with an active portfolio.

Documentation from the last committee meeting in 2008 showed the original intention from a review of the future investment of bonds was to manage the portfolio through one of the pension scheme's passive manager, Barclays Global Investors (BGI).

But as the scheme's investment regulations prohibit investments of more than 35% of the fund in "any single insurance contract", and it already invests 35% in passive equities the intention to place 15% of the fund in passive bonds would require the appointment of another passive manager.

Instead, the pension committee agreed to tender for an active bond manager to run the portfolio, leaving BGI to run all the passively-managed equities, as it decided to try and obtain better performance through an active portfolio.

The tender notice, managed by Hymans Robertson, revealed the council would consider absolute return bond products benchmarked against sterling cash, and although a performance objective has not yet been agreed, it is expected to have a target of between +1-3% per year. 

The council also confirmed the mandate could be split between more than one manager, and while the contract is classed as ongoing it added it would be subject to review every five years, or "more frequently if required".

Meanwhile, the Gwynedd Council pension committee has also appointed Fidelity as a global active equity manager, following the termination of a UBS global equity contract at the end of 2007 - though UBS is still employed to run property investments - and the decision to reduce Capital International's global equity portfolio following poor performance by the managers.

The assets from the reduced Capital International portfolio and the UBS mandates were temporarily transferred to Legal & General in February 2008, and in September Gwynedd tendered for a global equity manager to run the new mandate. (See earlier IPE article: Gwynedd drops UBS in search for active equity)

Details from the latest meeting of the pensions committee for the £792.7m scheme in February 2009 revealed three investment managers, GMO, Newton and Fidelity, were selected for interviews out of a shortlist of eight companies, with Gwynedd subsequently appointing Fidelity.

Elsewhere, the closing date for tender applications for the active bond mandate is 6 April 2009, with the successful candidate expected to be the most economically advantageous in relation to specified criteria.

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 nyree.stewart@ipe.com

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