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Hammersmith & Fulham move towards dynamic asset allocation

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  • Hammersmith & Fulham move towards dynamic asset allocation

UK - The London Borough of Hammersmith and Fulham pension fund is seeking a dynamic asset allocation manager to run a mandate worth £120m (€157m).

The scheme, which has assets of approximately £460m, revealed the mandate requires a dynamic asset allocation across a full range of global investment opportunities.

Hammersmith & Fulham said it is seeking one or more managers to provide a target return of 4% above the UK three-month London Interbank Offered Rate (LIBOR) over a rolling three-year period, with 5-10% volatility.

Applications to run the mandate will be judged primarily on quality, followed by  technical merits and the price, and the scheme is expecting the successful appointee to start in July or August for "an indefinite period".

The tender for a dynamic asset allocation manager follows a decision by the Pension Investment Panel in September 2007 to try and diversify the fund away from its current asset mix of 70% equities and 30% bonds.

In the third quarterly meeting, the panel agreed there was a need to adopt a more active fund management approach, in order to "reduce risk, volatility and capture gains from movements in the market".

As a result, the panel voted in favour of starting the process for appointing a dynamic asset allocation manager, and in a further meeting on February 5 it considered a report relating to the procedure for appointing a new fund manager.  (See earlier IPE.com story: Hammersmith & Fulham seek actuarial consultant)

However, as the panel acknowledged the process of adopting a dynamic asset allocation would take up to six months, it also commissioned a report on the "options for using hedge funds or derivatives to minimise the possibilities of likely volatility in the markets in the short-term".

Deadline for tender applications is April 14 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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