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Hackney adopts GTAA and currency overlay

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  • Hackney adopts GTAA and currency overlay

UK - The London Borough of Hackney pension fund is seeking a new actuarial services provider, but has appointed managers for its Global Tactical Asset Allocation (GTAA) and currency overlay mandates.

Documents from the latest meeting of the £686m (€879m) fund's pension sub-committee, revealed the scheme has agreed terms with Barclays Global Investors (BGI) to run a GTAA mandate, while the committee agreed to appoint FX Concepts to manage the currency overlay mandate.

The Hackney pension fund, part of the Local Government Pension Scheme (LGPS), issued tenders for the positions in August 2007, although at the time the scheme highlighted it was still not certain it would adopt such strategies. (See earlier IPE story: Hackney looks to GTAA and currency)

The procurement update from the Committee's meeting last week revealed some of the surplus cash in the fund from higher levels of contributions would be used to fund the currency overlay mandate, while the GTAA mandate - which was expected to be funded by returns form property exposure - will be financed by a reduction in the scheme's UK equity allocation.

Contracts are expected to start at the end of April/beginning of May, subject to "satisfactory progress with the Investment Management Agreements (IMAs) and the funding being in place".
 
In the meantime, the fund has issued a tender for actuarial and benefit consultancy services, as its contract with the scheme's existing actuary, Hymans Robertson, expires at the end of October.

The tender reveals the contract will include the provision of triennial actuarial valuations; the calculation of FRS17 valuations; advice and valuations for admission, and other specialist actuarial related services.

The contract is expected to initially last for four years, but there is an option to extend it for a further two years, and the tender will close to applications on May 12 2008.

Elsewhere, the £1.27bn North Yorkshire pension fund has issued a prior information notice indicating it will shortly be seeking an overseas equity manager to run a £250m portfolio beginning on October 1 2008.

The notice follows recommendations from the scheme's investment strategy update, which also suggested issuing a tender for a global property manager to improve diversification.

The update, issued to pension fund committee members in February, discussed the possibility of investing in the 'alternative' asset classes of property and high yield bonds.

However, as the fund already has a "very small exposure" to high yield bonds, the report suggested the scheme should hold further discussions before altering its allocation in this area, although it recommended beginning a search for a global property manager as the sector "appears to offer much greater opportunity" than the UK market.

As it can take several months to become fully invested, the report recommended the scheme should start searching for a global property manager" within the next few months" to ensure it is invested before the end of the year, the suggestion being the new portfolio should be funded by reducing the scheme's equity allocation by 5%.

Meanwhile, the £660m London Borough of Newham pension fund is searching for two global equity managers to run two high performance unconstrained mandates totalling £160m.

The investment strategy update presented to the Pension Fund Committee by the scheme's investment adviser, Hewitt, in February, suggested the new mandates would help increase expected returns and reduce risk.

The two unconstrained mandates will be funded in part by £160m formerly managed by Capital Management, but these assets are currently run by Legal & General as part of a £294m investment in a passive fund.

Newham claimed appointing two new managers alongside the two current active managers - AXA Rosenberg and Alliance Bernstein - would "diversify manager risk and enable the Fund to structure a portfolio that is appropriate for a number of different market conditions".

At the same meeting, Committee members also agreed to the two further recommendations put forward by Hewitt, which is to keep the scheme's bond allocation under review with the aim of increasing it as yields begin to rise, and to make a 10% allocation to hedge funds, as a diversification tool, once Committee members have received further training on the different strategies available.

The tender for the two unconstrained global equity mandates will close to applications on April 25 2008.

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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